As a small business owner, you probably take on a whole range of responsibilities, including the payroll. It’s a complicated subject matter, and if you don’t do it correctly, you face hefty penalties from the IRS.
If you need to know how to do your own payroll, here are 5 tips you should know so you can avoid these painful fees.
- Encourage Direct Deposit for Your Employees
Your employees may like getting physical checks in their hands, but this creates more work for you. You should encourage them to sign up for direct deposit.
This is a win-win situation for everyone involved. Not only do your employees get paid quicker (checks can take some time to clear), but you also have fewer papers to keep track of.
- Familiarize Yourself with State and Federal Taxes
Not only do you have state taxes to deal with, but you also have federal ones. In some cases, you even have local taxes. It can be very confusing trying to determine which taxes need to be withheld.
To avoid any trouble with the IRS, you should familiarize yourself with all the taxes that can be associated with running your business. This enables you to not only avoid penalties, but also dispute anything that seems wrong.
- Use Payroll Software
If you don’t have the time or energy to learn all the local, state, and federal tax laws, a good alternative is using payroll software. While you’ll still need to manage payroll yourself, the program will take a lot of the calculations and tedious work out to save you time.
- You Need to Keep Good Records
There are so many things involved with payroll that it’s imperative that you keep good records. It can be very time-consuming and ineffective to try and keep track of everything on your own.
For this reason, we recommend using a pay stub creator. All you have to do is fill in the drop-down form and it’ll take care of everything else for you.
- Make Payroll Tax Deposits Accordingly
You’ll have to make payroll tax deposits on either a weekly, biweekly, or monthly basis; the frequency will depend on how big your payroll is. Since this is a recurring deposit you’ll have to make, it’s essential that you don’t miss any payments.
Payroll tax deposit penalties scale, meaning the rate goes up the later you are with your payment. For example, the penalty is 2% if you’re 1 to 5 days late. Then, it goes up to 5% for 6 to 15 days late.
Know How to Do Your Own Payroll
By knowing how to do your own payroll successfully, you can save a lot of money. These savings can then be used to fund things you need for your small business, such as an extra refrigerator or more arts and crafts supplies. Once you learn all the ins and outs of payroll, you’ll be able to do it yourself for years to come.
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