Regardless of the type of business that you run, you are always going to have to deal with two things if you have employees: payroll and taxes. These business obligations can bite you in the rear-end if you fail to do them properly, so here are five tips to help you stay on top of things and avoid any unnecessary issues:
1. Don't Try to Be a Hero and Handle Payroll by Yourself.
Unless you're in the accounting industry, it is highly unlikely that you are an expert when it comes to payroll, taxes and other accounting things. Plus, running a business can take up a lot of your time, which doesn't leave much time for payroll. When it comes to payroll and taxes, it is crucial that things are done on time and properly to avoid penalties from the state and IRS. Allow someone else to help with these financial-related tasks to not only make your life easier, but to make sure that you can focus on operating your business as a whole.
2. Make Sure to Maintain an Up-to-Date Record of Profits and Losses.
A current and accurate profit and loss statement will help you keep a good idea of where your business I financially on a monthly basis. It is helpful in identifying what's coming in and what's going on for the business. This data can prove to be very valuable when figuring taxes and what expenditures can be reduced or eliminated completely.
3. Classify Your Contractors and Employees Correctly.
Make sure that you are properly classifying each one of your workers. You may hire full-time employees (W-2) or you may opt to hire independent contractors (1099-MISC). Or you could hire both. Whatever the case may be, if someone is providing services for your company, they need to be classified correctly because the status of each work will have an effect on the payroll. Don't forget to also consider whether you want to pay your employees a set salary or pay them by the hour. Salaries can take the guesswork out of payroll and increases consistency, but many employees prefer to stick to the hour for fairer compensation.
4. Consider Opening a Separate Bank Account Strictly for Payroll Purposes.
While you would never intentionally take money that belonged to your employees, it is best if you have payroll money in another account. That way you are never tempted and you don't accidentally use it for general business expenses. This bank account can be used for both the employees' salaries as well as the payroll taxes that you need to pay in. Overall, it's just a wise business move.
5. Pay Payroll Taxes When You Pay Employees.
Consider making a deposit for your federal payroll taxes at the same time that you issue payroll to your employees. Since there can be stiff penalties from the IRS for not paying your taxes on time, yet there is no penalty for paying whenever you want, it makes sense to stay caught up with the taxes so that you don't have to worry about it later. Plus, like with the above tip, you won't have to worry about accidentally using those funds for other business-related expenditures.
For more information or to hire help, don't hesitate to contact a local payroll or tax service like A & C Accounting & Tax.