The Ins And Outs Of Making Payroll EasierJacqueline Williams
July 23, 2009 — 1,749 views
I've decided to dedicate the month of June's posts to payroll. Typically whenever you mention payroll to a small business owner, immediately they cringe at the idea of having to pay payroll taxes. And of course, the complexities of taxes don't make the situation easier to bare. Then what's the solution? Well, the solution to make this whole process easier can be three fold.
First, you can be proactive by educating yourself on payroll processing and handling it yourself (and by the way it's more than just cutting a check to an employee).
Second you can outsource the entire function.
Or third, you can keep the easier components in house, and outsource the difficult parts, such as the payment of payroll taxes and filing of reports.
Whatever method you decide to use, it's best to prepare yourself up front by making sure that you have all pertinent information in each employee's file. Information such as; name, address, hire date, employee status, birth date, social security or tax id number, means of contact, form I-9, age certificates and state exemption certificates. Your best course of action is to have a completed employee information sheet with all this data in the front of their file. In addition, make sure that you also have a completed W-4 form.
The average employee doesn't understand how to accurately complete one of these, that's why it's not only necessary to include the instruction sheet, but to also review the form carefully before including the data in the employee records. Remember, it's the employee's responsibility to determine the amount of withholding s to report on form W-4, not the employer. The employer only provides assistance in the completion of the form.
One of the most important components of payroll processing is making sure that your worker is properly classified. Time and time again, I've counseled business owners on the difference between employee and independent contractors. Many are determined to take the Independent contractor route because of the benefit of not having to pay payroll taxes. However, the IRS has very stringent rules concerning this classification. Independent contractors are workers who are in control of how and when their work is performed.
They are also responsible for the payment of any related federal and local taxes on their earning. On the other hand, employees are under the control of the employer, and the employer is responsible for the submission and payment of any related payroll taxes. The consequences of mis-classification can be costly. Therefore, it's to your benefit to make sure that you determine this relationship before making any payments to the party involved. Create a questionnaire. This should help to make the process a lot easier.
So as you see, the ease of the process comes with the collection of data. It's all in the initial set up that determines your success in having a decent payroll experience.
Partnering for your success!
Jacqueline Williams is Founder and Chief Financial Strategist of JE Financial Services (JEFS), a Baltimore based Bookkeeping and training services firm. JEFS specializes in providing training & development workshops focused on records management & systems implementation. In addition, JEFS provides the following services; Bookkeeping Training & Services, Payroll, Tax Preparation, Business Development & Consulting Services.
Jacqueline is responsible for providing strategic direction for the company and developing and managing the company's training programs. Jacqueline brings to her clients more than 20 years experience in the accounting profession. Visit our website at http://www.bookkeepingsuccess.com to download a free copy of "Selecting the right Bookkeeper for your Business"
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