Taxes can be more complicated for temporary staffing agencies than many other types of businesses. You may have employees with different types of status, such as part-time, full time and temporary. It’s important for a staffing agency to keep accurate records and fill out your taxes correctly. Let’s explore some tips for staffing companies for this upcoming tax season.
Top Seven Tips for Tax Season
Take a look below at some tax tips to keep in mind as another tax season approaches.
Make Sure You Know the Right Classification for Your Business
When filing taxes, you need to be accurate with both your state and federal forms. Your business classification depends on where you’re located and how your business is classified. The most common classification for a staffing agency is the full employer of temporary employees. Unless you live in a state without income taxes, you may need a state tax identification number. If you’re not sure about any of these issues, consult with an accountant, tax attorney, your state government or the IRS.
Keep Accurate Records
It’s essential to keep accurate and timely records for all your employees. This can be challenging for an agency that employs lots of people for short-term and long-term assignments. Whether someone works for you for a single day or all year, you need a record that includes their name, social security number, dates of employment, the amount they earned and other information that’s relevant for tax records.
Make Sure You File the Necessary Payroll Taxes
A crucial distinction for a staffing agency is whether the people you hire are employees or independent contractors. If they are employees, you’re required to pay payroll taxes on their wages. You also have to deduct employment taxes such as Social Security and Medicare. Independent contractors are responsible for their own taxes. If you mistakenly classify employees as independent contractors, you could be liable for paying back taxes.
See if You Qualify for Tax Credits
The Work Opportunity Tax Credit (WOTC) is a program that rewards companies that employ certain categories of workers such as veterans, long-term unemployed and recipients of food stamps. You can receive up to $9,600 per employee. You need to fill out forms provided by the IRS within 28 days of hiring a qualified employee. As many people in these groups seek temporary employment, staffing agencies are often eligible for these credits.
Pay Your Taxes on Time
To avoid penalties, make sure you pay both state and federal taxes on time. You are required to pay federal taxes electronically. The same is true for many states. Observe the deadlines and make the necessary preparations so you’re ready to file and make payments.
Keep Up With the Latest Regulations and Deadlines
Tax laws often change from year to year. Special circumstances may also affect deadlines. For example, in 2020, the IRS extended the deadline for filing taxes by 3 months. States also pass laws that may affect your business. For example, California recently passed new legislation regarding classification, making it much harder to classify workers as independent contractors. Be sure to stay current with the latest state and federal tax changes that may be relevant to your staffing agency.
Consider Financing to Meet Payroll and Pay Your Taxes
While the above tax tips can help, temporary staffing agencies sometimes run into cash flow problems that make it difficult to meet payroll or pay their taxes. If you’re facing this type of challenge, you should consider invoice factoring. Riviera Finance lets you receive up to 95 percent of billed invoices within 24 hours. To learn more about financing for temporary staffing agencies, contact Riviera Finance today.
Why Choose Riviera Finance as Your Invoice Factoring Company?
Choosing an invoice factoring company is a major decision. Most business owners want a factoring company that delivers cash in a hurry, pays personal attention to their needs, and exercises professional customer service in dealing with customers. Here’s why our clients choose to work with Riviera Finance.