Hiring your first employee(s)? Welcome to payroll taxes. If you’re new to venturing into payroll taxes, the advice in your best interest is probably to work with a payroll service provider. A payroll service provider will prepare payroll checks, record the proper withholdings, and file the appropriate tax forms. Your times valuable; and learning how to file payroll taxes is most often best outsourced for the busy entrepreneur. A payroll service provider will provide fiduciary oversight of the payroll process, and keep your business in compliance with payroll tax filings, and prompt payments.
Should you choose to outsource your payroll, it’s still helpful to understand the services your payroll service provider provides. Payroll service providers prepare employee paychecks from time cards or salary information each payroll. These checks can most often either be drawn from your businesses bank account, or from the payroll service providers account. They remit payments using the employer identification number of your business so they are not liable as an employer or agent of the employer for payroll taxes, your business remains liable. It is advised to use EFTPS for payment of payroll taxes with a payroll service provider. This provides confirmation that payments are being made. A payroll service provider computes the appropriate withholding from the employees paycheck, i.e. federal withholding, FICA, state taxes, local taxes, and retirement withholdings, if applicable. Applicable tax forms need filed too. Form 941 for instance, needs file by the last day of the month following the end of the payroll roll quarter; for Q1, ending March 31st, the Form 941 needs filed by April 30th. Payments on the 941 may need remitted on payments corresponding with payroll, i.e. monthly, minimizing the payment with the 941. A payroll service provider will handle all these compliance aspects. Some accounting firms even provide these payroll services for their clients. A payroll service provider also prepares the W-2’s and W-3 at the end of the calendar year for employees.
The most important part of payroll taxes is to not miss payments of taxes. The penalties and interest on late filings are excessive. Your business should have a line of credit to draw on if cash levels are too low to meet tax payments. Talk with your CPA to appropriately plan for this before it becomes a problem for your business. You need to understand that late payroll tax payments can have the IRS assessing levies against property and your business. Keeping in compliance is vital. Approximately 40% of small businesses use payroll service providers. If you choose to retain a payroll service provider for your business, check the history of payroll firm. Make sure there’re reputable. Do your due diligence. Work with people you trust. Better, have your CPA recommend who they think they you should work with. They know who’s reputable.
Summary: Payroll taxes are an important administrative duty when your business has employees. A payroll service provider can provide fiduciary oversight of this key tax compliance responsibility, and save you as an entrepreneur from nonstrategic tasks. Talk with your CPA to determine if a payroll service provider is in your businesses best interest for payroll.