When you own a business, it is important to have a payroll system set up and it does not matter if you have one staff member or thirty. A payroll system streamlines the ability to remain current with all the regulatory and legal duty as an employer. It also saves time and allows you protection from the costly penalties that the Internal Revenue Service can charge. How do you set up your payroll system
if you have a small business? Below are several suggestions that can help you.
The EIN Number
Your EIN or Employer Identification Number is important to your small business. This is easy to obtain from the IRS website and it is free. You must get this done prior to hiring any employees. The EIN is the same lingo as your Employer Tax ID number. It is essential to have one when it is time to report your taxes to the IRS or when you have to correspond with the IRS or any other state agencies. It is easy to apply for one online. Make sure to check your local government to see what else, if any, you need to file your business taxes. Every state is different.
Employee or Independent Contractor
It is also important to know the difference between hiring an independent contractor and hiring an employee. Sometimes, legally, it is not distinctly clear and may impact your withholding income taxes as well as how you are supposed to pay Medicare, Social Security and unemployment taxes.
Be sure to handle employee paperwork efficiently, keeping them filed away and safe for recordkeeping. Your newly hired employees have to complete Form W-4, which is the Federal Income Tax Withholding form. This is important so you can accurately take out the right federal income tax from the salaries of your employees.
The Pay Period
You should make a decision on how you will structure the pay period for your employees. Make sure you choose a period that works for everyone. Most pay periods are weekly, bi-weekly and monthly. Whether your employee works the complete pay period or not, you still have to withhold their income tax as is required by law.
Although, this is not legally required, it would be to your advantage to set up a payroll system to include the compensation terms for each employee, tracking their hours, paid time off and determining how overtime is paid. Be sure to include business deductibles, premiums for health plan and retirement contributions.
The Right Payroll System
Select the right payroll system, which will require keen attention to detail as well as accuracy. Choose the method that allows you to do this. You can consider using an outsource payroll service or hiring in-house staff. No matter which option you select, as an employee, you are the person responsible for the paying and reporting of all of your payroll taxes.
An accountant is one of the main professionals who can assist you in operating an efficient payroll system because of their knowledge, expertise and experiencing in choosing the right forms and record keeping. Bloch, Rothman and Associates
offer Denver payroll services to locals. Contact them at 303-321-7160 for a free consultation.