Getting paid is the number one incentive for going to work. Whether you work for a small or large company, businesses count on their employees to do their job effectively, and in turn, the employees depend on their employers to pay them for work performed.
You have taken the leap and started your own company. This is quite an accomplishment and there are a number of questions you need to ask yourself to make sure your business will continue to thrive and run smoothly. What are the steps involved to pay employees in a small business? How do you go about submitting payroll for a small business? You want to comply with company policy and adhere to state and federal regulations to avoid any problems. How do you get started?
Small Business Payroll
Putting payroll together for your small business will play a vital part in growing your business, along with making sure your employees are paid on time. You’ll need to make sure to be in compliance with your company’s employment agreement along with complying with federal, state and local tax regulations. Adhering to these policies will help sustain your business and you will have employees that love to come to work and do their job. Thus, creating a well-oiled machine. Both parties will have the security of knowing their job has been done and business will flow as it should. Payroll for small businesses can be challenging, but this can be done successfully.
Some Dos and Don’ts to Consider
Do:
- Do determine taxable wages and calculate how much will be withheld.
- Do determine taxable workers in your employ.
- Familiarize yourself with the tax system to make sure you fulfill all obligations.
- Do create a payroll budget
- Create a payroll schedule that abides by the company’s payroll agreement and makes sure to abide by federal state and local laws.
- Develop a timekeeping system that is reliable.
- Do find quality software for payroll. This will make processing payroll a breeze.
- Payroll program systems like pay stub generators are in place that automatically take care of state and federal taxes for you. This will ensure all earnings are deposited on time.
- Outsourcing your small business’s payroll and bookkeeping to a CPA or certified bookkeeper will save you time over the long run, and you won’t have to pay in house employees for these services which can help to avoid errors and cause you as the owner to be less stressed.
Don’t:
- Do not submit payroll without double and even triple-checking time cards.
- Do not wait every two weeks to calculate overtime.
- Do not misclassify employees by neglecting to decide a rate of pay for each position
- Don’t neglect to do an account review and set goals with each and every payroll client.
- Do not ignore opportunities that arise during tax time that help to create new revenue.
How much does a small business pay in payroll taxes?
All businesses with employees are required to withhold federal state and local taxes from the employee’s paycheck. Of course, this will help you to avoid fines and penalties. There are several ways the IRS calculates withholding income tax for employees. The wage bracket method and the percentage method. There are a few other methods included as well.
Basically, the amount withheld depends on the tax bracket allowances claimed on a W-4, marital status. Local taxes are based on cities, counties, school districts. You will want to contact your local or state government to find out the amount of taxes that need to be applied and the amount to be withheld.
You as a business owner withhold 6.2% of the employee’s paychecks then match the other 6.2%. In 2019 the maximum amount of income allowed to be taxed for Social Security was $132,900. With Medicare Tax, a flat rate of 2.9%. The business owner and employees are obligated to pay this amount.
Payroll taxes are federal taxes the employer and employee pay to help fund government programs. It is your responsibility as the employer to ensure that these deductions are sent to the IRS.
How do you pay these taxes? You will need to calculate the amount of federal income and FICA taxes taken from your employee’s paycheck. Next, calculate how much you as the small business owner will pay for FICA taxes. This will depend on how many employees you have on your payroll and how they are paid as far as weekly, bi-weekly or monthly.
How to Pay Employees in a Small Business
Be sure to have all of your employee’s personal information. Their EIN, name, address, phone number, Social Security number. You will want a record of the offer letter sent to the employee, the date he or she started with the company, the rate of pay, and how frequently they are paid. Any deductions, allowances for withholding like a W-4, and all benefits offered if any. You will then report FICA and federal income tax and submit these to the correct form.
In taking the time to examine small business payroll in the beginning, you will create less hassle and frustration for yourself and in the long run, your business’s finances will be the better for it.
For small business owners, it is strongly recommended that you take the time to do some research and find a professional to help you manage your payroll taxes. State and federal taxes can be easily tracked through a number of different digital platforms if you are wanting to take on this task yourself.
Your small business is very important to you and your company will be run by you spearheading the decisions and then passing on instructions to your employees. Asking yourself these questions and seeking help is certainly the first step in having a successful business.
If you need help calculating deductions and other important aspects of payroll, you can use Check Stub Maker to generate pay stubs in minutes.