When your just getting started, doing payroll manually might make sense. But, when you start adding subcontractors or employees, things get a pick trickier.
To avoid tax penalties and the increased amount of time you spend on payroll for your startup, here are five tricks.
- Register for an employer identification number (EIN) before putting employees or contractors on the payroll. You can apply online for free. Depending on where your business is based, you may also need to get a state-level EIN on top of your federal EIN.
- Ensure every employee has completed a Form W-4 documenting their filing status and any personal allowances. This should be completed when a new employee is onboarded. If working with subcontractors, ask them to provide a Form W-9, including the business EIN or social security number.
- Someone in your office should know both the federal and state payroll laws. There are employment taxes, such as Federal Insurance Contributions Act (FICA) taxes (i.e., Social Security and Medicare), local and state taxes, and income taxes per employee.
- Before running your first payroll, it’s important to establish a standard payroll policy. The policy identifies how payroll works; when the payroll period is; how much people can expect to take home; and how benefits (leave, overtime, etc.) are paid.
- Check your cash flow each month to ensure you can cover payroll. Monitoring your cash flow can help you spot potential payroll problems, like overstaffing or overpaying.
Running payroll might be one of those tasks you dread, but it has to happen. If you lack the skills, desire, or confidence to run payroll on schedule, give us a call. We’d be happy to help.
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