There are a lot of things first-time small business owners don’t know when they initially get started. Sure, they might have a million dollar idea, or be able to see just the perfect niche their company can fit in. They know what kind of equipment they need and they have put together a detailed business plan. But then it dawns on them that they need to pay their people and pay the right amount of taxes at the right time. At that point, panic can set in, and that’s why smart owners look for administrative support.
Maybe you’re in a similar situation. You’re burning the midnight oil just to keep your company going and devise smart strategies for growth. The only way you’d have the time to learn about payroll and keep up with changes in tax law would be if you cloned yourself. While you might opt to outsource payroll, it’s still a good idea to have a basic understanding of some of the nuts and bolts of the subject. Yesterday, we shared some tips to help make the payroll process a little smoother, and today we’d like to share a few more.
- We know, recordkeeping is intensely boring. It’s also intensely important if you ever get audited. Make sure every employee you have has filled out and signed a W-4 form. You’ll need to hang onto their W-4 for 3 years after they quit or are terminated. Make sure you have easily accessible copies of all tax forms and W-2 forms. Make sure you document every tax deposit made by either you or your accounting staff.
- The Affordable Care Act of 2014 has positively or negatively affected essentially every business in America. But it’s 2017 and, with a new President in office, big changes are likely. You might be able to take an approach that’s grandfathered or phased, but you’ll want to check the latest tax code to see how the ACA affects you. Keep in mind that, whether or not you help out employees with health insurance, premiums are usually deducted from their paycheck and paid to the correct insurance company on their behalf.
- We can’t stress enough how important it is to make your tax deposits on time? Why does it matter? Simply put, if your payments are late, you can be fined up to 100% of the tax. The IRS won’t care that your accountant made a mistake, or that there was a miscommunication between you and your payroll processing company. To avoid any issues, do what you need to do to pay on time.
- Be sure that you take the time to budget wisely. You’re legally required to match the amounts for Medicare and Social Security that you withhold from the pay of each of your employees. This amount should represent 7.65% of the gross earnings of each worker. You also need to pay federal unemployment, also known as the FUTA tax. For more detailed information, you’ll find it in exhaustive detail in the Employer Tax Guide, and that’s available from the IRS.