Payroll management can be a struggle for small businesses. Typically, you need to take into account various state and federal necessities and ensure that the lot is legally sound. Failing to complete the required information can result in fines, so many businesses can pay up to an extra $1,000 in fines for payroll inaccuracies.
Regarding your own payroll, you have two options: the first is to do payroll yourself, and the other option is to outsource.
While some entrepreneurs struggle at first to relinquish an integral piece of their business, outsourcing your payroll often comes with a lot gained in return.
Payroll outsourcing is the use of an external business to handle the management of your business’s payroll. So, instead of an in-house payroll or HR professional, a trustworthy third-party company takes care of the details. Choosing to outsource payroll may put your mind at ease because you are allowing a qualified professional to handle the situation.
Outsourcing payroll will be easier than you think. Remember that placing effort into this may save you a lot of time and money in the long run.
Which aspect of payroll would be most useful to you to outsource? Is there any facet of payroll management that you would like to keep in-house?
Keep in mind the different sides of payroll. Some services out there can only help with basic payroll functions but others can also help with human resource management.
Now, it is time to do some research. Some services allow you to choose how involved they will be in your payroll situation. By choosing the correct level you will be able to have personal security and peace of mind at a cost you decide.
For a provider, you want one that has the capabilities to quickly and easily integrate with your system.
It’s good to consider outsourcing payroll if you find that in-house management is laborious, expensive, leads to recurrent mistakes, or leads to potential legal trouble. You can start your payroll outsourcing adventure by creating a budget, deciding on the features you want, doing personal research, and then choosing a cost-efficient service.
How to Do Payroll Yourself
If you rather do payroll yourself, the task can be daunting or costly if you go forward not knowing what to expect.
Below, I will give you some steps to consider. Remember, for explicit guidance, you may need to consult a professional.
First, you need to appropriately compute payroll taxes. You can start by finding current rates. The percentages are decided every year.
Now that you know your tax facts, you can tackle the do-it-yourself approach. However, keep in mind that mistakes can be costly. Therefore, proceed with cautious optimism.
Let’s take it step-by-step:
- Employees will need to fill out their W-4 to state filing status and dictate individual allowances. Allowances and dependants tell you how much payroll taxes are taken.
- Before you attempt payroll, you need to make sure you have an Employer Identification Number (EIN). An EIN is used by the IRS to recognize a business that pays employees. You may also be required to acquire a state EIN.
- You need to keep in mind three important dates: employee paydays, tax due days, and tax filing deadlines.
- When you are ready to pay your employees, you need to figure out which federal and state taxes to reserve. I recommend using the IRS Withholding Calculator or a steadfast paycheck calculator.
- When ready, you need to submit state, federal, and local tax deposits.
- Lastly, you will need to send in the employer federal tax return and local or state return. Furthermore, be prepared for your annual filings and W-2s towards the end of the year.
The benefits of doing payroll yourself are all about how much control you have over the process. When you do payroll you can review and correct information before mistakes are made. If payroll is outsourced, you may encounter the risk of not knowing about errors until it is too late to fix them.
However, taking the pains of payroll on yourself requires patience and planning for each pay cycle. Also, doing payroll yourself takes the benefits of accounting specialists out of the equation.