Paying your employees and lowering your tax bills are some of the reasons why it’s important to run your payroll.
As a business owner, you may focus on growing your company by skyrocketing your sales. Yet, taking care of your employees and business financials by running your payroll without errors is vital to promote business growth.
You might have considered doing it yourself but think it’s too complicated. It can be challenging, but only if you don’t learn what is payroll and how to run it.
Don’t know where to start? We’ve got you covered. We’ll tell you all the basics you should know to start paying your employees today.
Keep reading for your small businessman payroll 101!
Paying Your Employees: What Is Payroll and How to Run Yours
Most business owners are intimidated by accounting operations. Yet, the first step is figuring out how to run your payroll. This term refers to the process of paying your employees.
Running an accurate payroll can be challenging. You’ll be responsible for calculating your employees’ pay, deductions, income tax, among other details.
While it’s a bit complex, it all comes down to learning how to pay your employees. Here are the 4 steps you should follow to run your payroll in no time.
1. Identify Your Company and Classify Employees
To identify your company, you need to request an Employer Identification Number (EIN) to pay your tax liabilities. Classifying your employees as independent contractors or employees is also vital to follow the applicable tax regulations. During their onboarding process, you should make sure to request a W-4 and I-9 to withhold the right income tax rate and verify their employment eligibility.
2. Determine Your Pay Period
Depending on your location, you may be able to pay your employees on a weekly, bi-weekly or monthly basis. It all comes down to the applicable local laws and the classification of your employees.
3. Choose Your Accounting Platform
If you’re an old school business owner, you may think calculating your employees’ pay by hand and drawing a check is easier. However, it can open yourself to liabilities due to mistakes when paying your employees.
Preventing these issues is as easy as using accounting software to maintain accurate records. Most platforms come with the option of setting up, calculating, and running your payroll.
While you can run your payroll by using the right accounting platform, you may consider outsourcing these services. Depending on the size of your business, the cost of payroll can range between $45-$112.
4. Run Your Payroll
After gathering all the required paperwork and setting up your payroll, it’s time to pay your employees. Depending on your accounting software, you may have to schedule it a week ahead. While it should run on autopilot, you should verify your payroll ran to make sure you pay your employees on time.
Can You Pay Your Employees Efficiently?
Learning what is payroll is the first step to pay your employees accurately. However, it’s vital to also learn as much as you can about the applicable federal and state tax regulations. Your business may be subject to penalties and fines if you don’t pay the correct tax liabilities.
While you can do it on your own, you may consider consulting an accounting professional. An accountant will provide insight into your tax liabilities and suggestions on how to run your payroll efficiently. You may also consider outsourcing your payroll duties so you can focus on growing your company.
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