Helpful Tips for Setting Up a Payroll System for Small Businesses

Payroll duties could turn to be a thorn in the flesh of a small business holder in the absence of proper administration. Instead of channeling strength on the core of the business, a business owner may become engrossed with lots of calculations that may seem not to add up to much. This, therefore, calls for an efficient and straightforward payroll system especially for businesses without an accountant. Following these steps will help you set up a workable system:

● Acquire an Employer Identification Number (EIN). It is requisite to get an EIN from the IRS before you hire employees. This is important and helps to report taxes to IRS. The number is also important in the event you have to report information about your employees to the state agencies.

● Find out whether you need local or state ID. Some local governments require that

businesses have identification numbers in order to report taxes.

● New employees you recruit must fill federal tax withholding forms. Having filled the form, the employee will give it to you so that you can withhold the right amount of federal tax from their pay.

● Documentation of employee compensation terms - In the process of setting up pay roll,

you may need to find a way of tracking employee hours, overtime payments, among other business variables. Remember that there is employee compensation as well business deductibles such as retirement contribution and health plan premiums that need to be deducted from employee’s pay and paid to the relevant authorities.

● Payroll administration calls for attention to detail as well as accuracy. Mistakes can be

costly. Therefore, before setting up a payroll system, you may need to do some thorough research so as to put all your options into perspective. You could ask other business owners as to the option they are using and how appropriate it is. In any case there are two options, in-house managing of payroll or out-sourced.

● Running payroll – Once everything is set, that is all forms and information are in place,

you are ready to run your payroll. Depending on your system of choice, you may need to enter it all by yourself or give the info to your accountant.

● Record keeping – There are laws that will require employers to keep specific records for

specified durations of time. You will need to keep a clear record of all tax deposits as well as copies of all filed tax forms among others.

With these tips in mind, you are ready to set up a payroll system that is workable and help you to focus on the core of your business.