Small-business payroll is one of the most challenging and time-consuming aspects of small-business ownership. Paid employees are happy employees, but sending in payroll taxes on time is also critical.
Take a look at our seven tips below to help you set up a streamlined, taxpayer-friendly system for your small business payroll.
1. Obtain Your Tax ID
Applying for an employer identification number (EIN) is the first step in establishing a compliant small-business payroll system. If you’ve already established your business as either a partnership or a corporation, you already have an EIN assigned.
2. Consider Whether Salaries or Hourly Wages Are Best
Pro tip: Salaries will be easier for you to manage when it comes to DIY payroll. You don’t have to count hours and account for overtime. But if you decide to pay employees hourly, have a reliable way to account for all their hours worked. A PEO can help you classify and pay workers correctly, so you meet legal requirements.
3. Classify Your Workers the Right Way
It’s vital to classify each employee properly, because issuing a 1099 to an independent contractor requires a different process than providing a W-2 to a full-time worker. How you classify your employees has a huge impact on the payroll taxes you owe and the process of payment.
4. Open a Separate Payroll Account
One of the best ways to make sure your employees are paid fully and on time and the government gets its due is to open a separate bank account dedicated solely to payroll. Automate your deposits into this account, then automate your payroll tax deposits to the IRS. This helps you keep your accounts organized and consistent and takes away some of the stress of managing payroll on your own.
5. Stay on Top of Payroll Taxes
Beware of forgetting to pay taxes on time — it can be costly. You could be liable for up to a 100 percent penalty if you don’t withhold and pay the correct amount of payroll taxes. Pay on time and always keep receipts of all IRS payments for your records.
6. Offer Tax-Free Benefits for Employee Bonuses
When you begin working on your own payroll system, you’ll start to see how expensive taxes can be. When your employees are up for review, consider rewarding them with tax-free benefits instead of simply upping their wages. You will indirectly put money in their pocket and preserve your own profits as well.
You could offer a childcare subsidy, a company cell phone, dental or vision insurance and more.
7. Weigh the Benefits of Outsourcing
We know small-business payroll is complicated — we handle it every day. But unlike you, we have years of training and experience on the topic. Wouldn’t you rather have an expert handle this task?
Outsourcing to a skilled provider offers countless benefits
Want to learn more? Contact WTA, Inc., today and we’ll give you a free quote on the cost of outsourcing small-business payroll to our qualified, certified team.