Omar Group CPA Blog

While many companies seek to hire new employees every day, many do not take the proper steps to protect themselves and their businesses. Employers need to become familiar with the hiring process, the required documents for their area and any associated taxes required to be withheld or paid by the business or the employee.

To learn more about hiring employees, review this list of 13 items that must be addressed:

1.    Employer Identification Number (EIN)- Each new hire must be associated with an employer identification number for their tax returns and IRS documents. You can apply for this EIN number by visiting www.irs.gov.

2.    State Labor Department- Your business must become registered with your state’s unemployment insurance tax agency. To learn more about how to register, visit. www.workforcesecurity.gov.

3.    Worker’s Compensation Insurance- To protect your business, apply and obtain worker’s compensation insurance. While many states require this insurance, in the event that it is not, seek an agency that can provide you and your business with this protection.

4.    Payroll- While your business can address its payroll manually, many businesses prefer to select an automated system as there are factors such as IRS payments, social security and Medicare payments that your business must make on behalf of your employees unless they are hired as independent contractors and paid on a 1099. You can learn more about which taxes must be paid for your employees by visiting www.irs.gov.

5.    Employee Tax Forms- Employees should complete a W-4 form stating the amount of taxes that they wish to have withheld from each of their paychecks. You can locate this form by visiting www.irs.gov.

6.    Employment Eligibility- Your company will be responsible for validating each one of your employee’s work eligibility and you must keep proof on file for each new hire for 3 years. The form that must be filled out by each new employee validating their work eligibility within the US is called an I-9.

7.    State Reporting- New hires must be reported to your state’s hire reporting agency. One of the primary reasons for this is to address any claims for child support. You can locate your state’s agency by visiting www.acf.hhs.gov.

8.    Notices Required to Post- Within your business, you must post several posters for employees to view. You can locate the required posters for your business by visiting www.dol.gov/elaws/posters.htm.

9.    File IRS Forms Annually- IRS Form 940 must be filed each year for your business, reporting any unemployment tax paid.

10.    Workplace Safety- As an employer, you are responsible for adhering to the requirements set out by the Occupational Safety and Health Act (OSHA). Most importantly, your workplace must be safe from hazards and you must keep accurate records of any accidents that occur on your property and during work hours. You can learn more about these requirements by visiting www.osha.gov.

11.    Employee Handbook- While this is not a required step, it is highly recommended. An employee handbook can outline your employment policies, can have your employment contract and can include the required forms to ensure that all steps are met when hiring an employee.

12.    Personnel Files- As there are many forms that are required to keep on hand, most businesses set up and regularly maintain personnel files. Each personnel file should contain relevant hire paperwork, tax forms, evaluations and any other pertinent information.

13.    Employee Benefits- It is not required for your business to provide benefits. But, if you do decide to offer benefits, be sure to establish enrollment procedures for all eligible employees.

Keeping accurate records for your business is a crucial task. But, many business owners fail to take the necessary steps to ensure that this task is completed properly. Bookkeeping is essential for ongoing record keeping, legal protection and accurate tax filing. By understanding what the most common bookkeeping mistakes are, your small business can work to avoid them.

Here are the 10 most common small business bookkeeping mistakes:

1.    Poor Receipt Record Keeping- Many business owners keep accurate records on larger receipts, but fail to keep accurate records of small expenses under $75. Maintaining accurate records can not only save you money on your income taxes, but can provide the much needed documentation in the event of a business audit.

2.    Lack of Professional Help- Many small business owners fail to recognize the importance of hiring a professional to manage the task of bookkeeping. A bookkeeper will not only know what to record and how, but they are kept abreast of legal changes that you may not be familiar with on an ongoing basis, many of which can save your business capital.

3.    Poor Tracking- Many business owners pay for expenses out of their own personal funds. And, they often do not keep accurate records of these expenses. It is important to keep accurate records of any and all expenses and whether or not they were reimbursed.

4.    Improper Employee Classification- Many businesses have a combination of independent contractors and employees. The business must properly classify their employees for tax purposes.

5.    Poor Communication- Strong communication between employees and bookkeepers is essential as this will work to avoid reporting and other financial mistakes.

6.    Lack of Financial Reconciliation- It is vital that businesses reconcile their financial records at least on a monthly basis. Errors are more likely to be made if this task is not completed on a timely basis.

7.    Lack of Record Back Up- Even though we live in a technological age, issues can arise. It is important for every business to back up their data to avoid crucial losses.

8.    Poor Sales Tax Reporting- This may not affect every business, but not reporting sales tax and not accurately accounting for sales tax is a common bookkeeping error.

9.    Poor Petty Cash Management- Many businesses operate with a small amount of petty cash, but many lack proper accounting systems to track it. Be sure to set up a system to track the cash kept on hand in the business and what it is used for.

10.    Improper Expense Categorization- For proper tax reporting, business expenses should be properly categorized. Formal bookkeeping practices can be used to help reduce the likelihood of improper categorization.

Millions of people each year start up small businesses around the world. And, the vast majority of them will encounter challenges along the way. By learning what the most common mistakes made by new small business owners, you can work to avoid them as you establish your own small business.

Here are the top 10 small business start up mistakes to avoid:

1.    Lack of Market Research- Before you start a new business, be sure that you complete a thorough market analysis of the industry, the local and regional opportunities and the costs involved with the opportunity. This valuable research can help you to avoid selecting the wrong business opportunity and can also ensure that you correctly price your products and services.

2.    Lack of Accurate Records- Records are crucial for any small business. Some of the most important business records include tax forms, tax payments, expense logs, employment documents and legal documents. Without accurate records, you are placing yourself and your business at risk.

3.    Lack of Capital- Many small businesses begin without sufficient capital to sustain them. Be sure that you have taken an accurate assessment of the required start up and operating capital for your new business and add additional funds in the event that you run into unforeseen challenges.

4.    No Merchant Services Capacity- Many consumers prefer to make payment for their products and services using a credit card instead of with a check or cash. So, if your business does not accept this form of payment, you are limiting your pool of potential customers, and ultimately costing your business revenues.

5.    No Business Plan- While this would seem to be common sense, many business owners fail to build a business plan. And, without a business plan, you have no clear cut business direction.

6.    Lack of Suppliers- Nothing is more frustrating to customers than not being able to obtain the products that they are seeking. Your business needs to establish working relationships with reliable suppliers so that you can consistently provide products to your customers on an ongoing basis.

7.    Over Staffed- Too many employees can place a large financial strain onto your business. So, be sure to under staff until you are comfortable with the number of staff required to manage your business on a day to day basis.

8.    Lack of Employee Supervision- While we would love to trust every employee we hire, leaving employees alone without supervision can open yourself up to theft or lack of work due to personal distractions of the employee. Be sure to install camera equipment in your business if you are unable to be present during all working hours to monitor activity.

9.    Ineffective Hiring- Choosing the wrong employee for a job can be costly. Spend time in the interview process and use systems to improve your chances of a strong hire.

10.  Lack of Business Security- One of the largest costs that many businesses incur is employee theft. Be sure that your business is protected by use of cameras, software programs and cash register programs that monitor activity to reduce your risk of loss.