As a business owner, especially in the early stages of your company, it’s likely a lot of the payroll tax tasks rest on your shoulders. That doesn’t mean you have to figure it out alone! Not only do we offer a wide variety of services surrounding payroll and benefits, we’re also here to answer any questions you might have when it comes to payroll taxes (and more).  

In this payroll tax blog series, we’ve already covered taxable remuneration and exemptions, the key components to calculating payroll taxes, and the helpful tools offered by the Office of the Tax Commissioner to make this process easier. 

In this fourth part of the payroll tax blog series, we’ll answer some of the most commonly asked questions we’ve received from business owners when it comes to preparing their payroll taxes.   

When should a business register with the Office of the Tax Commissioner? 

The answer to this is as soon as business commences, which really means as soon as you’re ready to start acting as a business, you’ll want to register. If you are in the stages where you’re thinking about starting a business and you’re building a business plan, that’s not the commencement of your business, so no need to register just yet. However, when you start putting the actual pieces in place to start offering products and services, like starting business bank accounts, contracting with vendors, etc., that would be when business commences.  

Every employer and self-employed person who is liable for payroll tax must register with the Office of the Tax Commissioner within seven days of the end of the first tax period in which the employer or self-employed person begins business. It is actually a criminal offense to fail to register your business. If you still need to register, the form is available here. 

During the beginning of the COVID-19 crisis, many of the Bermuda government unemployment subsidies and other relief measures were tied to employers being current with both their social insurance and their payroll tax filings. As a result, we’ve seen a big uptick since the beginning of the pandemic of business owners realizing that they are supposed to be registered and wanting to get it right. Oftentimes, Abacus is able to help these owners correct any outstanding issues with their registration or payroll taxes, and we encourage you to contact us if you feel like this is an area where we can help you 

Here are some additional resources from the Office of the Tax Commissioner that you might find useful: 

    • Registering, Changing, or Closing a Tax Account — You can use this link to register your business — as required — for taxes, but also to make changes to your registration (i.e. updating the business name, address, ownership, or business structure), or to close the tax account if your business has closed either temporarily or permanently. 
    • Calculating Payroll Tax for the Period of April 1, 2022 – March 31, 2023 — This link includes important tax updates for this year, including the payroll tax calculators we covered previously in this blog series, but also new hire tax relief information and tax relief options for hotels, bars, and restaurants. 

How is payroll tax calculated for business owners who are not yet drawing a salary from the business? 

For  business owners who work for their business, if nothing has been paid to you as the owner, then nothing would be due as tax. You still have to file a tax return, and so in this instance, you would file a NIL return. Be aware, there have been instances where, if companies have filed more than one NIL return, the Tax Commissioner might reach out to check on the status of the business, but as long as the business is still active, you do still need to file the return. 

I am the only employee of my business and I don’t have separate bank accounts for my business and myself. How do I determine whether my business is paying for something — i.e. health insurance – or if I am? 

In an ideal world, you have a business account separate from your personal account and they would each be set up in a way that makes it easy to recognize when you’re actually drawing out of your business rather than paying for something personally. We highly recommend working toward this setup as soon as possible. 

However, we understand that sometimes that’s not feasible or hasn’t happened yet. If that is the case, and  you receive fees for or payments to your business into your personal account, what the Tax Commissioner is going to expect is that you pay on the net amount of money that your business has made.  

For example, if you earn $2,000 in fees and, of that money, you have to pay $500 for materials and $100 for your work phone and office supplies, the difference – that remaining net income – is what would be considered your actual owner income. This is why we highly recommend having separate accounts that are kept properly. You want to be able to identify what expenses relate to your company’s service offerings so that you can get a better idea of what your actual individual earnings are and not be responsible for paying tax on all the money your company earns. 

If I’m self-employed, do I have to pay both the employer and employee portions or just the employee portion?  

As a self-employed person, you are both the employee and the employer, and are responsible for paying both portions of the payroll tax.  

These are just a few of the questions we see often when it comes to payroll taxes. Keep an eye out for the final installment in this payroll tax blog series where we’ll cover more frequently asked questions. If you have additional questions, or if there’s any way Abacus can help you with your payroll or accounting needs, please contact us today.