Payroll taxes are changing, but how? Right now, the best answer we have is that we don’t really know. We have tax law but not regulations. The regulations give us instruction on how to apply the laws. There are some things we do know about the changes to payroll taxes. Look at a few of them below:
Social Security
Social Security is still 6.2% of gross pay. However, the new wage base increases to $128,400. This means that the most Social Security tax your employees will pay in 2018 would be $7,960.80.
Medicare
Medicare is 1.45% of an employee’s gross pay and has no cap. Earnings greater than $200,000 will be taxed at 1.54%. The employee, not the employer, will pay the additional 0.9%.
Federal Unemployment Rate
The wage base for Federal Unemployment remains at $7,000 and the effective tax rate will be 0.6%.
Federal Income Tax
This is where payroll taxes may get tricky. W-4s submitted by your employees determine the Federal Income Tax. This form shows their filing status and their chosen number of exemptions. Because we know that the tax brackets are changing, the W-4 will need to be updated. In an announcement on December 13, 2017, the IRS stated that, “We anticipate issuing the initial withholding guidance (Notice 1036) in January reflecting the new legislation, which would allow taxpayers to begin seeing the benefits of the change as early as February.” Until then, we will be using the 2017 tax brackets and W-4 and make any adjustments once the new information is available.
Supplemental Wages
Traditionally, since 2007, bonuses, commissions, and other supplemental wages have been taxed at 25%. With the new tax law, however, the tax rate may increase to 28%.
What Now?
We wait and we continue doing what we have always done until the IRS gives us a new W-4 and releases the notice. We also suggest that employees keep an eye on their withholding. Later in 2018 employees should look at their earnings, compare their withholding to the new tax tables, and make any adjustments necessary.
Does all of this still worry you? Do you find payroll taxes way too confusing already? Give us a call and we would be happy to take those worries off of your hands!
While working on my degree, one of my accounting classes talked about payroll. We also learned how to calculate paycheck withholdings. This transaction has a well defined formula; the steps are straightforward. I didn’t understand why would it ever be an issue for anyone. Then I started talking to friends that ran their own businesses and the difficulties became clear.
Payroll Rules
Many cities and counties are drafting their own regulations surrounding minimum wage, paid time off, and overtime. The uncertainty of how these laws apply to individual businesses, can make compliance a nightmare. As a result, the laws that apply where the business is located may not always pertain to your employees. This is especially true if services are provided in other cities. These challenges make it almost impossible for a business owner to do the right thing.
Local Changes
In the last few years, we have seen cities in Washington making some of these changes. Seattle and Tacoma were some of the first to vote in paid time off and minimum wage laws specific to their cities. In the upcoming year, however, our state lawmakers have added another layer of confusion to the issue by adopting their own rules surrounding paid time off. The Labor and Industries Department will be holding webinars over the next few weeks to make sure that business owners are fully informed of these changes.
Let Us Help
If you are feeling overwhelmed, or just want to ensure that you are compliant, give Sound Accounts a call. We make it our job to stay up to date on the most recent changes in rules and regulations. In fact, Sound Accounts will be attending one of the webinars put on by Labor and Industries to do just that for our clients. We can then review your records to ensure compliance and free you to do what it is that you do better than anyone else: being the reason your customers are keeping you busy.
Bookkeeping is moving farther away from desktop computing and deeper into the cloud. This means that there’s no reason to have an in-house employee managing the day-to-day transactions of your business. Additionally, outsourcing can tighten a company’s budget while maintaining high quality bookkeeping. Our list below explores a few reasons why you may want to outsource your bookkeeping and accounting functions.
Save Money and Reduce Overhead
Hiring an in-house bookkeeper can significantly increase your expenses. Outsourcing your bookkeeping, however, can save as much as 62% from your bottom line when you no longer must worry about their salary, payroll taxes, or benefits. Additionally, you will save on training, software, hardware, and office supplies.
Save on Technology Costs
Outsourcing means you don’t need to buy costly hardware or software for your bookkeeping needs. A good bookkeeper will have access to the most up-to-date software and will have the expertise necessary to properly use those tools to assist your business.
Automate and Reduce Paper
You can lower your carbon footprint! Hiring a bookkeeper who can access your files online will reduce paper and toner use as well as use of your copier, fax machine, and your printer. Less filing and storage of hard copies will also free up your time.
Focus on Growth
When you are running a business, it’s important to keep growing. Unfortunately, when you are spending time on your bookkeeping, those are minutes you aren’t spending growing your business. It’s also likely that, unless you have an accounting degree, a bookkeeper is going to manage your transactions far more efficiently than you can or may even want to. Your accounts receivable, accounts payable, manage vendor relationships, issue financial statements, payroll can all be handled by your outsourced accounting team.
Access to Financial Metrics
Most bookkeepers will do more for you than just enter your daily transactions and give you an update on the business health each quarter. Ask your bookkeeper questions about your business on a regular business so that they can provide you with the types of reports you need to see to make sure you are progressing financially.
Gain an Outside Perspective
Internal employees are often loyal to the company they work for. This may make it difficult for them to deliver less than positive news to the boss when they see something going wrong or a negative financial trend. Outsourcing your bookkeeping means bringing in a neutral third party who will not hesitate to let you know when your financial health is going sour.
Reduce Fraud
There are three main components that, when combined, often lead to fraudulent behavior. These components are: perceived unshareable financial need, perceived opportunity, and rationalization. According to a study released in 2012 by the Association of Certified Fraud Examiners, small businesses are the most common victims of fraud. When a small business does not have access to a competent controller, they are more likely to miss abnormal activity occurring within the transactions and billings. However, when small businesses outsource these functions to bookkeeping experts, one of the legs of the fraud triangle is removed – opportunity.
Scalable Options
Growing your business or identifying areas to reduce spending becomes much easier with outsourced bookkeeping. Your bookkeepers can give you feedback and suggestions to assist you with increasing your profits. Bookkeeping and accounting firms also have teams of people available to work on your account. If you ramp up production, you don’t have to worry about hiring additional staff to manage the added bookkeeping tasks.
Better Tools
It’s difficult to stay on top of the latest software. However, that is exactly what your bookkeeper needs to do. They will have access to the most updated bookkeeping software and apps. Having to consistently upgrade these powerful tools for an in-house accounting team could become cost prohibitive.
Peace of Mind
No business owner should leave their finances to chance. Utilizing an expert who handles your account with integrity and honesty allows you to focus on growing your business. You will need to manage and monitor in-house accounting teams. However, the bookkeeping contractor must make sure the work is done properly and on time.
For more information, contact us for a free consultation!
I’m not sure what got me thinking about this, but I’ve realized that creating good relationships with my clients is just like any relationship: they require work. To have great relationships with our clients, we have got to be willing to put in the time and effort to meet our clients’ needs. But what does that mean? Let’s look at what some of the experts say a good relationship requires and compare that to the vendor/client interaction.
Communication
Communication really is key. Often, we ignore the little things that bother us and sweep the issues under the rug. This doesn’t create a healthy relationship. I’ve found that if we don’t express our needs to one another, we can build up resentments. The other half of this equation is active listening. Too often, we listen to reply. We listen for key words coming from our clients and prepare our response instead of listening to their words, tone, and body language. Once we’ve heard them, we can take time to respond in a way that addresses not just their words, but the subtleties they are communicating as well. One technique I utilize is feedback. I repeat back to the client, in my own words, what I think it is they just said. It’s amazing how much miscommunication can be stopped with this simple practice.
Trust
Transparency is a great way to build trust with your clients. Being honest with them when you make mistakes or miss deadlines will help build trust. If you make an error, discuss why the error happened, what you are going to do to rectify the situation and what you will be doing to make sure it doesn’t happen again. Apologize and be humble. Your client is also more likely to trust you if they can see that you value their relationship. By putting effort into the relationship and believing that you have something to offer your clients, they will see that they are important to you.
Respect
In the book, The Four Agreements, author Don Miguel Ruiz encourages us to be impeccable with our word. This means that we say only what we mean, we don’t gossip about others, and we speak with truth and love. Respecting our clients means that we don’t talk about them negatively with others. It could also be demonstrated by giving our clients one point of contact for all their issues. This shows our clients that we value their time. We can also show respect to our clients by showing them kindness and gratitude. Customers report that they will spend more with a company because of historically positive interactions.
Quality Time
It doesn’t really matter how much time you give your clients. What is important is the quality of this time. Make sure that you really listen to your clients when they are speaking. You can do this by delivering the unexpected. Listen to what they express about “nice to have” items. Can you do something to make those wishes come true? What are your clients’ pain points? Are their processes flawed in some way that you could fix?
Misunderstandings Happen
Again, this comes down to communication. There will always be times when you and your clients fail to understand one another. How you approach these misunderstandings will make all the difference. Put together a strategy about the best options to fix the issues before going to your client. Once you have that plan in place, discuss it with your client but start with humility.
Other times, your client may be wrong. I’ve found the best strategy here is to keep from pointing the blame at them, but to ask key questions to help them see their own mistakes. Sometimes, a client will fail to listen to key points of a plan and that is cause for the issues at hand. Talking them through it and offering more details or education about the missed points will help your client feel like you really are there to help them.
Conflict Resolution
Conflict is an opportunity for growth. Utilizing conflict in a positive manner can improve communication with the client. I’ve found that I must choose my battles. Like any good relationship, there are times when some conflicts just aren’t worth the time and energy necessary to resolve them. If I find the issue is worth confronting, I try to make sure that I’m using the right body language if I’m addressing it in person. Appearing positive and open will go a long way to helping the client relax and accept what you must say. I try to focus on the facts and leave opinion or emotional responses out of the resolution process. I choose my words carefully and use statements that begin with “I” to avoid casting blame. Often, a client simply needs to be heard, so approaching them with understanding and empathy is really all that is needed.
Don’t Make Assumptions
This can go both ways. Don’t assume that you understand what your client is relaying to you and don’t assume that they understand your meaning, either. To help keep your messages clear there are three steps you can take: 1) be specific – give the who, what, where, when, and how details and spell them out if necessary; 2) ask questions – ask the listener specific questions about the information you provided to them to make sure they understood you; and 3) feedback – repeat what you just heard back to them in your own words. Utilizing these same tools in reverse can keep you from making assumptions about your clients’ statements as well.
Follow Through on Promises
If you tell your client you will do something, do it. If you say you’ll be there at a certain time, show up or text them as soon as you can to let them know you’ll be late. Blowing off promises systematically destroys trust. Great relationships require trust to thrive. If you have a horrible memory, utilize a calendar or make lists. There are a multitude of reminder apps out there to help keep you accountable.
Be Realistic
It’s always better to under promise and over deliver. If you consistently tell your client that you can do it all and then regularly fail to do so you are eroding the trust. This means you are going to need to know your limits. I manage these by trying to explain any potential obstacles, choosing flexible deadlines, and maintaining open and honest communication with my clients throughout the entire process.
Be Generous
Does your client have a charity they are fundraising for or a non-profit they help? There are many ways you can show your clients that you care about their interests. Most feel that the easiest way is to donate funds. Perhaps that doesn’t work for you. There are still ways you can contribute. Can you give an hour every month or quarter to volunteer? What about putting a flier up in your office window to alert the community to the cause? Maybe you could send some of your employees to help at an event. There are a bunch of different ways you can show that you value that your clients are passionate individuals. Showing them this compassion and caring about their cause will go a long way to reinforce that you are someone they wish to continue a business relationship with.
Are you interested in working with a firm that puts their clients first? Contact us for a free consultation now!
