One of the biggest questions that new business owners have when they hire new employers is: how do I set up payroll? This is a good question because setting up payroll can be a tricky process to get going in the beginning. There are a lot of factors to consider and you not only want to make sure you are paying your employees their fare wages, but you also want to make sure that you are complying with tax requirements. If you don’t comply, not only will it hurt your employees, but it will also hurt your business. Here is how to set up payroll after hiring employees for your startup.
First and foremost, you want to make sure that you register your business with the IRS. You can do this by applying for your EIN number. EIN stands for ‘employer identification number’ and it will be the only way that you can link your business with the applicable taxes that are due when you process paychecks. In fact, you won’t be able to pay your employees anything until you have this number. You can visit the IRS website and follow the directions to apply for an EIN number.
After that, you want to gather the necessary information from your employees. Typically, you want to do this by having them fill out various tax forms. If you have part-time or full-time employees, there may be different tax forms that they need to fill out. The form will require a legal name, address and all the other application identifying information – including a social security number. Not only will these forms allow your business to legally pay your employees, but it will also be the documentation you need to prove that your employees can legally work in your state and country.
Next, you want to implement a payroll payment-processing program. This program will allow your business the convenience of automatically paying your employees when payday comes around. Not only will these programs prompt your bank – or payroll account – to send out checks, but it will also deduct all the applicable tax information. The deduction part is often the most frustrating and confusing part for businesses because it can be tricky to know how much should be deducted from each paycheck. With a program, however, it will make the entire process a lot easier and it will eliminate clerical errors that are common when paychecks are written by hand.
In the end, payroll can be confusing and time consuming, but if you get all your ducks lined up and you stay organized, it will be a much simpler process. On top of setting everything up, it will also be incredibly important to hire an accounting firm – like Bowman and Company CPA PC – to make sure that your business is handling accounting accurately and in a timely fashion. The last thing your business wants – or needs – is a major audit. It will not only be invasive, but it could also slow down your business in a big way.