1. Doing your own payroll.
• Do not even think twice about this one. Zen Payroll costs about $30 per month and is a great product. We have a firm of experienced CPAs and we do not do our own payroll.
2. Filing your Income Tax return late.
• For companies with foreign shareholders or foreign subsidiaries, there is an automatic $10,000 IRS penalty for filing late.
3. Receiving an IRS notice for #2 above and not responding or paying it.
• The IRS now has the right to penalize you $10,000 per month for the next five months.
4. Not securing Workers’ Compensation insurance before you run your first payroll.
• Workers’ Comp is required in all states when you have a payroll. Penalties can be significant for noncompliance – NY penalizes employers $2,000 for every ten days without Workers’ Comp.
5. Not charging Sales Tax.
• Many states now require companies to charge sales tax on SaaS and other products/services sold or delivered via the internet. There are 50 very different sets of rules and there can be personal liability for Officers. CA, NY, NJ, WA and MA are among the most aggressive states.
IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.
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