As your small business grows, you will eventually need to hire some employees to help. Setting up payroll for your employees can be a daunting task. You need to keep track of many things, such as tax forms, direct deposits, and bank statements. Whether you are just opening your business with a whole staff or running a business on your own for a while and are just adding an employee, setting up your payroll for the first time can be overwhelming. Here are a few steps to setting up payroll for the first time.
Before You Run Payroll
Before setting up payroll, there are few important things you need to gather first. You must register for several accounts before you can run payroll. Each of these accounts is required to run payroll and pay taxes. These requirements include:
- An Employer Identification Number (EIN)
- An Electronic Federal Tax Payment System (EFTPS) account for paying federal taxes
- State tax accounts, such as state unemployment tax
- Your state’s new hire reporting account
- Workers’ compensation coverage
Be Aware of All Tax Laws
Tax laws are constantly changing, and not paying taxes correctly can result in large fines. When running payroll, you will need to be aware of all tax laws you must follow, including local, state, and federal taxes, so you are withholding the proper amount from paychecks.
Choose Your Pay Schedule
Once you have filed the correct tax paperwork and classified your business and employees, you must decide when payday will be. Check all federal and state requirements to see if they have any restrictions on pay frequency. Many employers favor a biweekly model, which is the best choice for organizations operating in multiple states. Other options include semi-monthly and monthly.
Decide How You Will Track Hours
It is important to consider how you will track and record your employee’s hours each day. You can use time tracking software for small businesses to help with employee attendance management. You also need to know your employee’s hourly wage or salary. You can calculate the employee’s earnings using that information. Remember to include overtime wages and any other earnings.
Stay on Top of Due Dates
In addition to paying your employees on time, you also need to pay all your taxes on time as well. When you run payroll, you need to get familiar with withholding payroll taxes to comply with the IRS. You will need to withhold taxes from each employee’s gross pay every pay period. Depending on your business, you might only need to pay taxes once or twice a year, while other companies may have to pay quarterly.
Contact Bowman & Company Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim to decrease your taxes and increase your net worth through responsible, timely, and accurate record keeping. We offer our services to clients throughout the Washington, D.C., metropolitan area, including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter, Linkedin, Facebook, and Youtube.