Handling payroll and taxes for a small business
Handling payroll and taxes for a small business. Taxes and payroll even in a small business is not something you should take lightly. The reason is that if you slack off in any area where these responsibilities are concerned, you can find yourself in both financial problems, along with possible legal problems.
Where you are looking at payroll and taxes, you will find there are a couple different ways to handle them. You can either do them yourself, hire someone to do your payroll and taxes, or outsource to a company to handle these things for you.
Most of the time small business owners are happier to outsource these responsibilities to a company who specializes in taxes and payroll. This is for a couple different reasons. First, there are legal complications to improperly completing payroll and taxes. The second reason being that if you have not specialized in these areas, it is rather hard and tedious to complete.
There are many laws and rules that come along with payroll and taxes. Here are a few of those rules to keep in mind.
- Payroll taxes are due either semi-weekly or monthly. This greatly depends on the size of your payroll. Thus, if your total payroll for the quarter is less that $2500, then you can file quarterly. However, if it were more, then you would need to file semi-weekly. The IRS will help you to know what you will need to do. If there is a very large amount of payroll, say over $100,000 then it could be as soon as every three days.
- As you are looking at the taxes for employees, this is how they go. It is required to with hold Federal income tax. The W-4 that is completed helps to know the amount of tax an employer will need to have removed from the payroll. These amounts vary depending on a couple different things. Here are some of those things.
When you are completing your payroll, there are other rules like Social Security and Medicare (FICA) that needs to be taken out. This is a payment that takes care of a partial retirement and assistance for the employee when they are no longer able to work. This also helps to cover the medical costs for the employee in their retirement. The amount of this with holding is 7.65%. The employer also needs to match that percentage amount.
You will need to have an EIN that is obtained from the IRS. This is the Employer Identification Number. There is a separate EIN for each business. Filling a SS-4 form does this.
There is also the tax for unemployment that needs to be filed with the taxes and is done the time of payroll. However, this tax is not removed from the employee's payroll. The employer pays it. This helps in the case that there is accident or injury from work. The rate of this payment is in the amount that is base by the total number of employees a company has. This tax goes to the State and Federal government. However depending on the amount you pay to the State will adjust the amount you pay to the Federal Government.
- The number of with holding allowance claimed.
- The marital status of the employee.
- The exemptions that the employee will claim.
When you are doing your payroll. It will be important to figure out what is the best time frame for your company for when payroll will be completed. This can be worked around a couple different things. With a small business, making sure there is income to cover the cost of payroll is sometimes an issue in the beginning.
Keep in mind that once the time frame is set, it will be very difficult to change it. So if you go with a weekly paycheck paid on Friday. Make sure that is going to be something that can be done.
You will also need to find out what the delay will be on your checks. Will you have a one-week, two week etc with holding? It will be important to explain this information to your employees, in order to set proper expectations.
With all of this in mind, you can see that there are certain responsibilities where the payroll and taxes are concerned for a small business, that it may be better to hire a professional, or outsource to a professional company.
However these are the basics for handling payroll and taxes for a small business. Deciding what you will do with it is going to be up to you.