Small business owners are struggling with confusion over the taxes they’re required to pay. According to a recent survey from payroll provider SurePayroll, 42% of small business owners say their biggest issue with taxes is not having to pay them, but figuring out complex and constantly changing tax regulations and requirements. That’s why more than half (52%) are using a payroll service to pay their employees accurately and handle the calculations, deductions, filings, and payments necessary with payroll taxes. Of course, there are many services out there and you want to choose one that’s not only reputable, but the right fit for your business. You also want to have a basic understanding of how payroll works. Payroll Basics As an employer, it is your responsibility to withhold federal, state, and local taxes from employee paychecks, including Medicare, Social Security and income tax. The employer then matches the withholdings for Medicare and Social Security. The employer is solely responsible for FUTA (Federal Unemployment Tax Act) and SUI (State Unemployment Insurance) taxes. For SUI, the rates change state by state. It’s important to understand that every state and often individual municipalities have their own specific requirements around payroll. There’s no hard and fast rule that covers all states, so you’ll have to research your state’s payroll laws. Payroll for New vs Existing Businesses Your reasons for looking at payroll services could vary greatly depending on what stage your business is in. If you’ve already been in business a few years, you may have tried to do payroll on your own for a while and are now looking to relieve yourself of that burden, so you can focus on growing the company. You may have also been hit with a fine or made an error that caused some difficulty with an employee. Those already using a service may be looking to switch for: More customer service support Better user experience running payroll online Ability to do direct deposit More value for the price Those starting a business are often coming to payroll for the first time, and are looking for: Help walking through their first payroll run Set up with the proper documentation including Employer Identification Number (EIN) and State ID Employee onboarding (W-4) Choosing a payroll frequency (bi-weekly, monthly, etc.) Watch Out for These Mistakes Regardless of how you handle payroll, there are common mistakes that are important to avoid. One is not getting the proper payroll information from new employees, such as the W-4 that lets you know how much the employee wants deducted from their check. Another is improperly classifying a worker as an independent contractor rather than an employee. This type of mistake can result in having to pay back overtime, taxes, and even fines and penalties. Bonuses are yet another area employers often forget to enter into the payroll system. Final Word on Payroll Payroll is a necessary function and it should be handled with care for your business. That doesn’t mean, however, that it should take a lot of time or cause anxiety and headaches. Fortunately, technology has made it relatively easy if you’re using the right service – just enter the salary numbers and hours, preview the information and run the payroll. It should be that simple. As an entrepreneur and business owner, you’re likely an expert in whatever product or service you’re offering. You shouldn’t have to be an expert in payroll. This article is courtesy of payroll services provider SurePayroll.
