How to Setup Your Small Business Payroll
It doesn’t matter how many employees you have. It’s necessary to set up a payroll system to stay on top of your responsibility as an employer.
In addition, it saves time and helps protect you from incurring expensive IRS penalties. It’s time to take a look at these steps that will help you set up a payroll solution for your small business.
Here are the steps to Setup Your Small Business Payroll
- Get an Employee Identification Number (EIN) to be identified as a business entity. You can apply online on the IRS website. Check with your state to make sure you’ll need an EIN.
- Determine which of your employees will be salaried, which are part-time, and which are independent contractors. Your business does not have to withhold taxes on independent contractors.
- You have to fill out a W-4 form which is available on IRS website. This will include the person’s Social Security number, how many deductions the person will take, and other data.
- Will you pay employees once a month or weekly? It’s most common for employees to be paid every other week, but if you sign up with a payroll company you’ll pay a fee every time, so you may want to save money by paying once a month.
- Are you paying salaries, hourly wages, or a per-project fee? Do you pay for vacation time, sick leave, or personal days? Is an employee contributing to a benefit plan such as health insurance premiums?
- Employment taxes are complex and the most important part of the process. You need to withhold federal, state, and local taxes, plus the employee’s portion of Social Security and Medicare taxes.
- At this point, most small businesses either set up an in-house accounting system such as QuickBooks to a payroll accounting company. The systems make it easy and calculate what the taxes are and when they need to be paid.