(Mistake #4 in a Series of 7) When you start a business, sign up for all tax accounts that apply to your company.
Why is this important?
Failing to set up proper payroll tax accounts can mean fines, penalties and government audits, and paperwork nightmares.
How to avoid this mistake:
Apply for all applicable tax account numbers as soon as possible. Here are the most common account numbers you will need:
- Federal Employer Identification Number (EIN): Use the EIN number for federal taxes, including federal unemployment (FUTA). Apply online or call the IRS at 1-800-829-4933.
- State Income Tax: Apply for an income tax withholding account for your state. Look up your state info here.
- State Unemployment (SUTA): Apply for a SUTA account with your state. Look up your state info here.
- Local income tax and school district tax: Some states have local income tax and other special taxes. If you withhold local tax as a courtesy, apply for account numbers in the employee’s city of residence. For multiple worksites, be sure to apply for withholding accounts in those cities.
If you’ve made this mistake:
Contact the agencies immediately to apply for withholding accounts and get up-to-date with your tax filing and payments.