Payroll for a small business may not be a huge issue for the first few employees hired but it can get a bit complicated soon. Still, it is essential to keep track of what you are doing in the aspect of payroll to ensure legal compliance and to avoid losing your staff.
Use these 12 tips to make payroll a breeze for your small business:
1. Selecting the right payroll company
The first process entails coming across the correct payroll service that works for your company’s requirements and price range. Consider options like:
- Companies where you can contract out your payroll service and have the companies take care of calculations and filing of tax returns for you
- Local software used in the computation of salaries that you can use internally.
- The payroll services that are provided by these accountants
- A pEO that offers end-to-end outsourcing of HR services
Cross-compare fees by pay period as against monthly fees for the various service providers as well as the various features.
2. Collect Employee Paperwork
Newcomers should complete paperwork involving tax, such as W-4 and I-9, to calculate the tax to be paid and the legal status of the employee. Also acquire other specifics such as their home address, their Social Security number, birth date and authorization for direct deposit.
3. Follow Payroll Tax Rules
Remain in compliance with federal, state, and local payroll taxes. Know the requirements for:
- Tax that is paid to the government on income received in a given financial year
- Social Security and Medicare taxes are two types of taxes that affect the self-employed and small business owners.
- One is federal and state unemployment taxes
- Local taxes
It is therefore advisable to work hand in hand with your tax professional in order not to go wrong here.
4. Choose a Pay Schedule
There are various common patterns that small business organizations use to remunerate their employees these include weekly, bi-weekly, semi-monthly or even monthly. Choose what suits your monetary plan and specialization. Many employees prefer bi-weekly.
5. Calculate Overtime Correctly
Now read federal and state laws to know the criteria for overtime pay. The rule applicable to all federal employees is that they are supposed to be paid 150 percent of the basic wage for all working hours beyond 40 in a week. Some states such as California have even more stringent provisions.
6. Handle Payroll Deductions
Apart from tax deductions, other forms of deductions could include other items such as health insurance and 401k retirement savings plans. Subtract these amounts appropriately from the gross wages.
7. Deposit Taxes
That way, when you deduct taxes from the employee Paychecks, remit these monies to the concerned federal, state and local authorities on the required dates. This allows you to avoid incurring penalties.
8. Reconcile Payroll Taxes
Total tax expense on the income statement for the quarter or year is compared to the taxes paid. Determine if there are any differences and penalties before filing the payroll tax returns.
9. Distribute Payroll
They currently want their paychecks to be processed quickly, with no mistakes in depositing their money and being able to view their pay stubs online. Select contemporary formats and give concise guidelines about when the payments will be made and when the relevant information will be available.
10. Maintain Payroll Records
Ensure proper storage of other documents relating to time cards, taxes, earnings, deductions, and other financial information. These records should be easily accessible for at least 4 years for auditing purposes.
11. Set Up Payroll Controls
Implement rigid internal controls that will permit only those in the human resource department with access to sensitive data about the employees and the payroll. Measures such as having two people countersign for the payroll can help to avoid such pitfalls or fraud.
12. Make Annual Adjustments
Check the current federal and state tax rates for your payroll system annually under the new tables and guidelines. Other considerations that should be made when determining tax changes include any life events that may affect employees such as marriages, divorces or new dependant children under 14.
Outsource to the Experts
Handling a small business’s payroll independently can require much time and energy, not to mention the legal consequences if a mistake is made. An experienced payroll provider is always using up-to-date software, knowledge and resources and therefore should be in a position to manage the payroll function efficiently and economically. Since you cannot afford to lose that business, it is time to partner with the best experts!
Everything that has been said above shows that it is high time you consider outsourcing your small business payroll to us. Together with you we will ensure it is done right so that you can do what you love the most – running and further developing an incredible company.
Contact us here for tax preparation services now!