Handling payroll can be a challenging aspect of running your small business, and the tax law surrounding payroll makes it even more complex. Fox Business recently released a created list of 7 Payroll Tips for Small Business Owners. The article highlights how to keep payroll on track and ensure that you are complying with the IRS.
Here’s how to successfully manage your payroll to assure you remain compliant with all applicable laws:
Make sure that you properly classify your workers. Anyone who performs the same services as those offered at your business is usually classified as an employee, so paying them as an independent contractor might not be legal.
Properly categorize all of your employees as salary or hourly. This is of critical importance when it comes to exempt and nonexempt status for overtime purposes.
Set your payroll budget to include not only the wages that must be paid but also payroll taxes. Check to see if the state your business is located in requires you to pay other employment taxes and include those rates in your budget as well.
Ask your payroll-processing company to automatically make the federal and state tax deposits on your behalf. Falling behind on payroll tax deposits can be costly, as you may be subject to a 100% penalty if you don’t turn deposits over to the government by the due date.
When it comes time to increase an employee’s compensation, consider the possibility of doing so in the form of tax-free fringe benefits. Some employees may consider a supplemental insurance benefit or a employer contributions to a retirement plan of equal, or even greater, value than a pay raise.
As part of the Affordable Care Act, businesses with more than 50 employees are required to provide health insurance to those employees. If your business has fewer than 25 full-time employees, you are eligible to receive tax breaks if you pay for at least 50% of your employees’ premiums and if those employees’ average annual wages is under $50,000 a year.
Get help. Don’t handle the complex nuances of payroll on your own. A Professional Employer Organization can manage your payroll for you, so that you can be freed up to focus on running your business.
Taking the time to understand payroll tax law can help trim costs and make sure you don’t run into unwanted trouble with the IRS. Please feel free to reach out to us if would like additional tips on how to handle payroll or other parts of your small business.