You’ve got a good team. They do their jobs well, keep customers happy, and serve as ideal ambassadors for your business. Still, no matter how much they enjoy working for you, they’re not doing it for free.
Complying with all federal and state payroll regulations requires excellent payroll management.
Making sure they’re paid on time, and that you’re complying with all federal and state payroll regulations, requires excellent payroll management. To make sure your payroll procedures are in good shape, here are seven key tips it pays to follow.
1. You must have an Employer Identification Number
As a business, you need an employer identification number (EIN) for payroll purposes. This number is used by the IRS for payroll processing and payroll taxes. If your business is a partnership, you should already have an EIN. If you don’t have this number, be sure to contact the IRS at 1-800-829-4933 to apply for one.
2. Properly classify your workers
Your employees’ work status can have a notable effect on payroll processes. For example, if anyone you may consider an independent contractor performs the same services your business offers, they must usually be classified as an employee.
So make sure you classify them properly when doing your payroll and covering your payroll taxes. Of course, since this involves tax regulations, there are exceptions. To learn more, be sure to check out IRS Publication 15.
Make sure you classify employees properly when doing your payroll and covering your payroll taxes.
3. Consider a payroll services company
You’re accountable to your customers. But unless you have a solid accounting background, you should consider outsourcing your payroll. With all the rules and regulations involved – filing quarterly reports, withholding employee taxes, issuing W-2 forms, etc. – it’s a good idea to let an expert handle your payroll requirements.
They’re knowledgeable about current laws and can take care of everything in an accurate, timely manner, so you can spend your time taking care of customers.
4. Make federal and state payroll tax deposits
No one likes paying taxes, including payroll taxes. But you certainly won’t like the penalties for not paying them. In fact, you could be facing a 100 percent penalty for failing to turn deposits over to the government by their due dates.
So have your payroll-processing company automatically make your federal and state tax deposits for you. That way, you’ll know they’re taken care of, keeping you in compliance and in good financial shape.
5. Reduce taxes with fringe benefits
Instead of giving raises, giving fringe benefits can benefit your employees and you. Pay increases mean payroll increases, which means payroll tax increases. Fringe benefits, on the other hand, are often tax-free.
They can include dental and vision insurance, a cell phone, a child-care subsidy, even a retirement plan. Plus, employees are likely to consider such extra perks to be as equally valuable as a pay raise. For more information on available tax-free benefits, check out IRS Publication 15-B.
6. Set your payroll budget
You have to pay your employees. And you have to pay Uncle Sam. So you need to set your budget to include employee wages, and also the payroll taxes to be paid to the federal and state governments.
As a business owner, you’re required to match the Social Security and Medicare that’s withheld from your employee’s pay, which is equivalent to 7.65% of the gross pay. You’re also required to pay FUTA tax for the federal unemployment fund, and there may be other required taxes depending on your state.
To find out all the applicable rates and percentages, take a look at good old IRS Publication 15.
7. Know your labor laws
As a business owner, it’s your responsibility to know labor and payroll laws, both on the national level and the ones that apply to your state. As one example, federal and state laws require you to post wage-and-hour notices and maintenance of payroll-related records.
It’s your responsibility to know labor and payroll laws.
It’s to your benefit to have a system in place ensuring you follow all relevant laws, and that you stay current with any changes that could impact your payroll management.