If you’re looking for a step-by-step guide to payroll for small businesses, you’ve come to the right place. From drafting a payroll policy to creating a paycheck, this article outlines everything you need to know. It even covers what to do if you hire contractors or non-US workers.
Employer Identification Number (EIN)
Table of Contents
You may wonder how to proceed if you’re setting up a new payroll system with the best payroll software for your small business. Whether you’re a startup or an existing small business, several steps exist. This step-by-step guide will walk you through the process.
First, you’ll need to decide on your legal structure. You can operate as a sole proprietor, a partnership, a limited liability company, or a corporation. Your desired design will depend on your specific needs.
Then, you’ll need to get an Employer Identification Number (EIN). Your company is identified by this particular number with government organizations. It also includes information on your income and taxes you pay on behalf of employees.
You can apply for an EIN by telephone, fax, or online.
After completing the application, you’ll receive a receipt and an EIN Confirmation Letter. You can store the letter or print it out.
You can then pay your taxes using the IRS’ electronic federal tax payment system. Payroll taxes include Medicare taxes, Social Security taxes, and FICA taxes.
State Withholding Allowance Certificates
If you own a small business, you might be interested in learning more about state withholding allowance certificates and the tax form that goes with them. Well, you aren’t alone. Knowing how much tax is withheld from your employees’ paychecks is essential.
You’ll need to take a comprehensive approach to get the most out of your small business tax form.
Wage Bracket Method
Federal income tax can be calculated in two different ways. You can choose the cheaper option or, desire, the more expensive route. For the small business owner, the latter is the way to go. The resulting payroll taxes are remitted to the tax authority in quarterly installments. Some states will require you to withhold more than the required minimum. Fortunately for you and your employees, tools can do it for you. Among these is a payroll software withholding calculator. Using this tool, you can closely monitor your bottom line. It also lets you double-check your math.
The IRS has published a list of small business tax withholding rules. If you have questions, don’t hesitate to contact your state department of revenue or the IRS. Generally speaking, the IRS is a friendly bunch and will be happy to help. Regardless of your situation, you can rest assured that your company’s tax burden is in good hands. However, if you want to make your life easier, there is nothing like a computerized payroll system to get the job done right the first time.
Payroll Forms For Contractors And Non-US Contractors
When you hire a contractor, it’s essential to make sure you have all the necessary payroll forms and documents. Whether you’re hiring someone in the US or an overseas national, there are many different documents that you’ll need to keep track of.
You’ll also need to collect certain tax and employment information from each worker. The IRS can help you determine which forms you need. Sometimes, you’ll need to use an independent contractor registration system.
For instance, you’ll need contractors to fill out Form W-9 and W-8BEN to verify their legal status. If you’re hiring a foreign national living in a tax treaty country, you can eliminate some withholding amounts.
Another form you’ll need is Form W-2, which shows employee earnings from the previous year. Having this on file is crucial before you start paying your employees. This will ensure that you’re paying the correct amount of taxes.
You will also need to pay federal and state taxes. Payroll taxes depend on the wage and hour laws in your form. Additionally, you’ll need to withhold payroll taxes from your employees’ paychecks.
Drafting A Payroll Policy
When drafting a payroll policy for your small business, it is essential to understand some of the details of the payroll process. This includes determining the frequency of your payment schedule, collecting employee tax information, and calculating payroll taxes. Consider consulting with an accountant to ensure your payroll system is set up correctly.
One of the most critical steps in preparing a payroll for your small business is establishing your . This number identifies your business to the government. It is also the number on which you will receive tax payments on behalf of your employees.
Next, you must determine the best way to deliver your payroll. Many businesses allow employees to receive their pay through paper checks or direct deposit. Another critical step is to obtain workers’ compensation insurance.
Once you have established your EIN, you can create a payroll schedule. A typical payroll schedule is biweekly or monthly. However, depending on your state’s labor laws, you might need to pay your employees more or less often.