As a small business owner, you’re always looking for ways to save money.
Running your payroll is an easy way to streamline your operations while lowering your costs. You may think it’s too difficult, but it all comes down to learning the most important payroll basics.
We’ve got you covered. Here are the top 5 expert tips you should follow to start running your payroll today.
1. Request and Maintain Up to Date Employee Tax Forms
Every time you bring a new employee on board, it’s important to request the applicable tax forms such as W-4s and I-9s.
A W-4 form defines how much federal income taxes you need to withhold from your employee’s paycheck. As an employer, you’re responsible for sending all federal income taxes withheld to the Internal Revenue Service (IRS).
Keep in mind you should ask your employees to submit a new W-4 when their tax situation changes. You’ll also request employees to submit an I-9 to verify their employment eligibility and identity.
2. Determine Your Employees’ Classification
Before running your payroll, it’s vital to determine your employees’ classification.
Is your employee an independent contractor or employee? The IRS uses the employer’s behavior, business relationship, and financial control to determine the classification of an employee.
Mistakes when classifying an employee can make you liable for employment taxes and penalties. If you’re unsure about your employees’ classification, you should consider consulting an accounting expert.
3. Choose the Right Pay Schedule
Are you paying your employees on a weekly, bi-weekly, or monthly basis?
Depending on the size of your company and location, you may be able to pay employees once a month. However, you should consider the applicable regulations to determine the best pay schedule while complying with local and federal laws.
4. Automate Your Tax Payments
Small businesses often suffer cash flow issues pushing owners to delay paying their tax obligations. If you’re currently making tax payments by mailing checks to the IRS, you should consider automating them to prevent any fines or issues.
5. Generate Pay Stubs for Your Employees
Pay stubs are an easy way to maintain a record of employee salary information, withheld taxes, among other details. You may think it’s complicated to generate these documents, but that’s far from the truth.
The key is using a pay stub maker to automate this process. This platform will calculate and fill all the necessary information based on basic details such as salary and company name. Generating these documents will also provide proof of income to your employees.
So You Learned the Most Important Payroll Basics, Now What?
Understanding the most important payroll basics is the best way to ensure you’re fulfilling your duties as a small business owner. If you have been operating for some time, you should take a hard look at how you’re running your payroll.
Are you following the applicable tax regulations? Are you generating pay stubs for your employees? Take a look at your payroll processing and figure out where there’s room for improvement.
While you may be able to run your payroll, you may consider consulting an accountant. An accounting professional can provide insight into how to improve your payroll processing and pinpoint any flaws in your financial operations.
Did you find this article interesting? Check out the rest of our site for more insightful articles.