One of the most important tasks ahead of a small business owner is setting up a payroll. It is the administrative life-blood of the business and if it is not done correctly, costly Internal Revenue Service penalties could follow.
Here are the 10 steps the U.S. Small Business Administration recommends:
- Obtain an Employer Identification Number (EIN). Before hiring employees, you need to get an employment identification number (EIN) from the IRS.
- Check Whether You Need State/Local IDs. Some state/local governments require businesses to obtain ID numbers in order to process taxes.
- Independent Contractor or Employee – Know the Difference. Be clear on the distinction between an independent contractor and an employee.
- Take Care of Employee Paperwork. New employees must fill out Federal Income Tax Withholding Form W-4.
- Decide on a Pay Period. You may already have a manual process for this, but setting up a pay-period (whether monthly or bi-monthly) is sometimes determined by state law with most favoring bi-monthly payments.
- Carefully Document Your Employee Compensation Terms. As you set up payroll, you’ll also want to consider how you handle paid time off (not a legal requirement, but offered by most businesses), how you track employee hours, if and how you pay overtime, and other business variables.
- Choosing a Payroll System. Payroll administration requires an acute attention to detail and accuracy, so it’s worth doing some research to understand your options.
- Running Payroll. Once you have all your forms and information collated, you can start running payroll.
- Get Record Keeping Savvy. Federal and some state laws require that employers keep certain records for specified periods of time.
- Report Payroll Taxes. There are several payroll tax reports that you are required to submit to the appropriate authorities on either a quarterly or annual basis.
Taking your payroll online, via SurePayroll, helps a small business owner accomplish many of the steps above. It takes care of the drudgery and allows the business owner to focus on growth and profit.
Just like traditional payroll services, SurePayroll manages payroll taxes for customers — the most tedious part of payroll — calculating local, state and federal tax withholdings, and deposits and files them on the business owner’s behalf.
And you can lean on SurePayroll to make sure you stay abreast of federal and state tax issues via our free compliance resources.