Mike Holt Enterprises Understanding the NEC
Mike Holt

This newsletter series will give you insights and techniques to help you build a better business no matter how large or small yours is. I always say that success comes from working on your business as opposed to in your business. I want to share with you the systems and philosophies that have been successful for me over the years.

This is newsletter #22 in the series. If you have missed prior newsletters, and are enjoying the series, we encourage you to purchase the program. More information can be found by clicking on the coupon at the bottom of this page.

Taxes
Set aside monies you collect for taxes so you don't have problems paying them when due.

If you are a business owner or manager, have employees, or have a sales tax number, you will be collecting and accumulating money to pay federal, state, and local taxes. This is a great responsibility with huge penalties and one area that many small businesses struggle to manage.

Tax obligations. It's imperative to recognize that money collected for tax isn’t your money and must be put away to meet tax obligations in a timely manner. It has been said that the easiest way to eat an elephant is one bite at a time. Tax obligations work the same way! They can quickly add up to huge amounts of money. It's much easier to pay them if you put the money away a little at a time as you collect it, instead of trying to "come up" with the required funds when taxes are due. Consider depositing tax monies in an interest-bearing account on a regular and frequent basis.

Payroll Tax. For payroll taxes, consider enrolling in a program that automatically pays the taxes when you process payroll. The larger the amount you collect, the more important it is to pay close attention to this even if you aren’t directly making these payments. Don’t try to use this money to pay bills on time or to finance jobs hoping a check will come in time to cover taxes. If you use sub-contractors, require each of them to fill out a W-9 form and make sure to report their earnings on Tax Form 1099.

Authors Comment: When using sub-contractors, remember that you are legally required to carry workers compensation insurance for your employees and you're also responsible for any uninsured sub-contractor's employees. As you collect a W-9 from each sub, make sure to get a copy of their insurance certificate and confirm that they have their employees covered. When your insurance company does your annual insurance audit, they will charge you additional premium for any sub-contractor that you have paid and haven't collected proof of insurance for. This can be a nasty surprise if you receive a bill you weren't expecting.

Sales Tax. One of the most complex types of tax to manage is sales tax. Over the last decade tax laws have rapidly increased in scope and complication to the point that it's almost impossible to keep up with all the rules and requirements. Hire a business tax accounting professional to help you meet all the requirements for the areas you work in. If you work in multiple states or across areas within a state that require you to submit individual tax reports, consider using a subscription service to automatically calculate and submit you tax payments.

The following list includes some of the forms you should be familiar with:

  • IRS Forms: W-2, W-4, W-9, 940, 941, UTC-6
  • Tax Payments and Due Dates, Penalty Charges
  • Federal Unemployment, Social Security, Medicare, and Income Tax Withholding Calculations
  • State Unemployment, Income Tax Withholding, and Sales Tax Calculations
  • Social Security and Medicare Withholding Calculations

• • •

We'd love to hear from you about this series, and the ways you're using it. Send us your comments and feedback by clicking on Post a Comment below. Look out for the next part in this series a month from now, and please share with your colleagues.

The above content is extracted from Mike Holt's Business Management Skills Program.


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