Running a small business can be rewarding, of course, but it comes with its fair share of challenges. Among your ever-growing to-do list, you are responsible for handling your small business payroll to ensure staff members are compensated correctly and on time for hours worked. If you’re still trying to get a good grip on your small business payroll needs, you may find yourself kept awake at night trying to figure out how to calculate payroll or wondering how you can complete payroll using a business online payroll solution.
Wonder no more! Here are the answers to the top 5 small business payroll questions you need to know.
The Top 5 Small Business Payroll Questions You Need to Know
Do Small Business Payroll Mistakes Matter?
Bottom line, yes, they do matter. Knowing how to calculate payroll correctly the first time saves your small business time, money, and keeps you compliant. While most are familiar with IRS compliance, payroll compliance is very important and means you are adhering to payroll rules set by the government. If you fail to pay the appropriate amount of complete payroll taxes or misreport payroll, it will cost your business a lot in fines and time lost.
Are New Hires Classified as Employees or Contractors?
The main difference between a contractor and an employee is the responsibility of payment. If the individual is a contractor, they are responsible for performing a specific task for a set amount of time at a predetermined rate. As a small business owner, your sole responsibility to contractors is to write a check once the task is completed.
If you are paying an employee, you are responsible for withholding federal, state, and local income taxes based on your business location. Additionally, you are required to withhold the employee portion of Medicare and social security. PayWow’s innovative payroll software automatically withholds the correct amount of tax withholdings, Medicare, and social security to ensure you submit complete payroll.
Note: If you make the mistake of paying an employee as a contractor, you will be held liable for back taxes.
Should Employees Receive a Salary or Hourly Wages?
There is a big difference between salaried and hourly workers, which can easily affect your small business payroll. Hourly employees require you or a manager to track hours worked on a timesheet. Furthermore, hourly employers are subject to the Fair Labor Standards Act that provides a set federal minimum wage and rules for overtime. In addition to a fixed federal amount, many states have a separate minimum wage and overtime rules.
Salary employees and workers are paid a set amount per year that is divided over a payment schedule. If your salary employees earn more than $23,600 per year, then they are not subject to overtime or minimum wage laws.
Depending on your small business type, you most likely have a mixture of both hourly and salary employees. It is crucial to remember that differences in pay structure also impact your employee’s healthcare benefits eligibility.
What Employee Information Should I Request?
In order to correctly pay your employees, you must have the following information to complete payroll services for your small business. Here is a checklist that will help you remain organized and compliant at all times.
- Employee’s IRS Form W-4
- IRS Form W-9 ~ For contractors only
- A valid copy of the employee’s Social Security Number
- Proof of residency or Form I-9
- Proof that the employee has the legal right to work in the U.S.
- Employee’s full name, address, and filing status
- Voided personal check (If direct deposit is requested)
Are All of My Business Reporting Requirements Met?
You are not in the clear just yet; here are some of the last things you need to fulfill your payroll reporting requirements:
- New Hire and Rehire Reports, which must be filed with the state within 20 days of hiring.
- Payroll Tax – Federal, State, and Local
- End of Year Reporting (W-2s – Employees) (1099-MISC- Contractors)
- Pay Stubs (Majority of states require access to payment details and information)
Small Business Payroll Made Simple
Here at PayWow, we understand this is a lot to process, especially when you are trying to handle day-to-day business. This is why we have created an innovative full-service payroll process and compliance solution specifically for you. Let us run, file, and deposit all of your required payroll information and taxes on your behalf.
To learn more about PayWow and its amazing capabilities, click here. Alternatively, contact one of our team members to schedule a one month free trial of our business online payroll solution. We are happy to answer any questions and even guide you through the setup process.