One of the more intimidating prospects of owning and running a small business is getting the money right. Small business money concerns include budgets, taxes and payroll. Before diving headfirst into the payroll process, you will want the best tips and tricks for succeeding.
Gather the Tax Information
First, you must gather the right information for your business and payroll taxes. This means securing an Employer Identification Number, which is issued by the IRS and helps identify your payroll taxes as you pay them. You will also need any identification required by the state and local tax authorities for your type of company.
Another type of tax document you need to gather is the W-4 and I-9 forms your employee fills out with their information. These documents tell the government which people you pay taxes for in the form of paycheck withholdings. These papers are necessary to know whether you are paying enough and whether your employees can file for a return.
Set Payroll Policies
Once you have all of the documentation necessary for taxes, it is time to set up some policies around payroll. These policies should include how often you pay employees and what types of raises or salaries they should expect. You will also want to determine deductions for health insurance or other employee benefits.
You should set up any payroll partnerships and discuss policies with them to ensure you are not leaving anything out. For instance, partnering with cannabis payroll companies for your smoke shop will help you set policies and navigate the complicated tax law for the industry.
Do the Math
Now that you have the information and policies, it is time to do the math. You will need to determine the gross pay for your employees by multiplying the hourly wage by the number of hours each employee has worked. You will then make the deductions from the gross pay to determine the net pay.
You write the employee’s check for the net pay, the gross pay is recorded in your ledger and the deductions are paid to the appropriate fund. The more complex your deductions and the more employees you have, the more beneficial it is to have a third-party partner for payroll.
Keep Records and Make Adjustments
The tax information you have gathered, the ledgers for each pay period and any receipts you have for payroll deductions or tax payments should be kept together to make end-of-year processing easier. In addition to helping with yearly bookkeeping, keeping payroll records allows you to check the math if there is a discrepancy between what your employees expect and what they receive on a check.
It also allows you to show your books to a potential auditor more easily, taking some of the stress out of those proceedings.
Paying payroll taxes is unpleasant but necessary and can be made easier with the help of a good filing system and a payroll partner. The better records you keep, the easier it will be to address any mistakes or make necessary adjustments.
