Oftentimes, owning a small business can be overwhelming. That’s why you would really need to hire an employee or more to help you be on top of everything regarding your business. Hiring the right employees with the right mindset and skills can help you flourish your business.
Once you have an employee that depends on you, you should also be able to manage these employees’ payroll and do it in a way that would require so much of your time. They have to get paid in a timely manner and they should be paid the right amount as well.
Here are some payroll tips for small business owners to help them get their pay management in shape:
Invest in Payroll Software
A payroll system is going to be helpful for you, especially if you’re going to start with just a few employees. A payroll software can help you automate the process with just a few clicks after verification.
Further, a small business payroll software is much better than a manual payroll system since it’s prone to human errors. A cloud-based payroll software can also be accessed wherever you are so you can work on it in the office or at home – wherever is convenient for you.
Be IRS Compliant
Before small business owners get busy listing their hired employees, they must first research the rules they have to abide by in terms of the employee’s payroll to be considered compliant with the IRS.
Small business owners must first secure an EIN (Employee’s Identification Number). Check with the IRS on how to apply for one and how to be IRS compliant as well.
Classify Your Employees Properly
Employers’ responsibility towards the employee is highly dependent on their classification.
Hiring an employee requires you, the employer, to pay them a set amount as their salary based on the minimum wage requirement. Apart from that, they also have to pay for overtime fees and pay for tax. You also have to pay for their benefits, like health insurance, social security, and more.
In contrast, hiring a contractual worker is much less complicated since they pay their own tax and you won’t have to pay for their benefits as well. You only have to pay for the services they have rendered.
So, whether they’re independent contractors or an employee, make sure to classify them properly to prevent paying fines and back taxes to the IRS.
Know Your Deductions
After paying your employees’ salary and the payroll taxes, it’s important that you keep a list of all your business’ expenses as there might be items that could pass as a tax deduction for your business.
This would include the following:
The salary you paid for the first year of your business to employees.
Your contribution to their benefits, like health insurance and social security.
Bonus and commission paid to employees
Cash awards made to employees as rewards
Credits for hiring a veteran or a disabled individual and more
Make and Follow your Budget
In order to avoid depleting your personal finances in aiding your business finances, it’s important to create and follow a budget for your new business venture.
The budget that you’ve created for your business must also include the allocated budget for your employee’s salary and other fees that comes with hiring an employee. Keeping these things in mind when creating a budget would keep financial problems at bay in the future.
Be on Top of Your Taxes
Business owners are required to file and pay for a lot of taxes. Thus, it’s important that you’re aware of the deadline for the application of these taxes. Failing to file and pay for the taxes on the set deadline can result in fines and penalties.
If there’s no way that you can file before or on the day of the deadline, make sure that the W-2s or forms for employees that state their income and their tax are filed on time. The deadline for this is very strict and cannot be extended, so make sure they’re filed first.
If other business tax papers are not ready to be filed yet, then be sure to properly ask for an extension to the proper office to prevent getting additional fines or penalties.
As a business owner, you have many responsibilities in order for your business to grow. That’s why getting payroll software can greatly help you. If that doesn’t work, you can always hire an employee that would specifically take care of the payroll or get a contractor to work for your company instead.
Either way, you should get your payroll system in place to keep your payroll management efficient.