Some days I get so annoyed with the paperwork—and I know there are plenty of business owners like me. I’m not even going to share with you the details of my most recent issue with the state – why waste my good and productive energy?! I’m going to trust that you empathize and realize that regardless of how good your systems are, there will always be something that catches you off guard.
Running a business is filled with regulations everywhere you turn. These can drain precious time away from the core of your business, but if you ignore them, you could risk huge financial consequences without even realizing it. The best way to handle them is to understand your exposure and consult with experts to make sure you’re in compliance. Some of these compliance items apply only to businesses with employees.
Here’s a head start in creating a compliance checklist. This is by no means a comprehensive list although these are the items that are sometimes overlooked. Go through the list to make sure there aren’t any surprises for your business. If there are, feel free to contact us and we’ll help you organize your systems.
1. EIC notice to employees
It’s now required to notify certain employees annually about the Earned Income Credit so that more people who need it can take advantage of it. If you have employees, the next deadline for this compliance item is the first week of February 2013 and can be met if you use the right W-2 forms. Details are in IRS Publication 15.
2. Corporate meeting minutes
If you are incorporated as a C Corp or S Corp, you need properly formatted and executed documentation of the annual shareholders’ meeting, even if it is just you. Just about the first thing the IRS will ask for in an audit is your corporate meeting minutes. The risk in not having it includes a potential increase in tax liability from undocumented deductions.
3. PCI compliance
PCI stands for Payment Card Industry, and if you accept credit cards, you will have compliance requirements under this industry standard. The standard is designed to provide the cardholder with a minimum acceptable level of security, and your requirement is to maintain certain processes and procedures to safeguard any stored credit card data. QuickBooks Merchant Services division contacts each of their clients to ensure full compliance with safety and security; this year the process was much more rigorous than in the past.
4. Document retention
While it’s a great thing to go paperless, you may get caught by surprise if you are not downloading and preserving the items you used to have on paper. The IRS and other agencies still need proof of some items in order to approve the deduction. This includes invoices that are coming via email in PDFs, bank statements you’ve gone green on, and direct deposit payroll stubs, to name a few. Most banks are only allowing access to pdf statements up to twelve or eighteen months. It is imperative that you download those statements into your computer and have them archived for any future needs.
Fax copies fade after a few years and can catch you by surprise when you go to look up an old record and can no longer read it. It’s best to scan fax receipts in so they will stay readable for the length of the retention period.
You’ll also want to keep up-to-date on how many years it’s necessary to maintain these items in the case of an audit. You’ll find a great chart in Smart Books=Smart Business – How to Take Charge of Your Accounting and Run Your Business Profitably!
5. New hire reporting
In a small business, most of us are hiring so infrequently that it’s easy to forget this one. Most state unemployment agencies require that you report new hires within about three weeks of their start date. The purpose of this is to track fathers who have missed child support payments. Forms can be found at https://uitax.nvdetr.org
6. Changes in state tax compliance
As geographic borders disappear and our business expands, we need to regularly re-evaluate state requirements on income, franchise, and sales tax obligations. It can be too easy to “do things the way we’ve always done them” and forget that as our business expands into new territories, new obligations can arise.
If we’ve hired a virtual employee in another state, we may have new obligations. If we’ve earned money during a speaking engagement in another state, we may have income to report in that state. And, of course, if we open new offices in another state, we have new compliance items to deal with.
7. Payroll posters
Surprisingly, the highest payback item in the list for those of you that have employees may be posting your payroll posters. Compliance usually costs less than $100, and the fines avoided can be as much as $17,000, a pretty big dent, no matter how big your small business is. You can actually find these online as a pdf version and print your own—there’s no reason to skip this one.
Small Business Compliance
Did you get caught by any surprises? If so, let us know how we can help bring your business into compliance and help you avoid unnecessary costly risks.