How to Manage Payroll for Your Small Business

managing payroll for small business

Make sure to stay informed about the specific requirements of each state’s reciprocity agreement to avoid any potential tax-related issues. Failure to withhold the correct state income taxes can result in penalties for the employer. Lack of face-to-face interaction in remote work settings irs announces 2021 mileage rates for business medical and moving may make it harder to gauge productivity solely based on output. By having a remote workforce in place, your small business can adapt quickly to unexpected situations, maintain productivity levels, and avoid prolonged downtimes that could negatively impact your operations.

Payroll services designed for your business

These few accounting products fell short in our ratings rubric on a number of fronts. We recommend skipping them in your exploration of the best accounting software for small businesses, unless you can live without some key features these products lack and their price tag feels worth it to you. In our review of more than a dozen accounting software products, NerdWallet determined a couple of products are strong contenders that may be worth consideration for certain businesses. Consider one of the following solutions if those on our list above don’t suit your small-business accounting needs.

TimeTrex: Best Free Payroll Service for Companies Willing to File Payroll Taxes on Their Own

After inputting the code, I was asked simple questions about how I wanted to use the account, such as if I wanted to invoice clients or run payroll. Interface designers clearly worked hard to ensure that data is not overwhelming but is at your fingertips at all times in intuitive-to-find locations. I was impressed with OnPay’s customer service, particularly over the phone. While it took longer to hear back through the chat function, I was able to reach someone in just a few minutes over the phone. The OnPay representative provided a clear answer to my question and asked if I needed anything else. I felt like the company was genuinely interested in helping me rather than selling anything.

Akaunting: Don’t be fooled by “free” software

Offering easy system navigation, Gusto includes new-hire reporting, flexible payroll schedules, unlimited payroll runs, contractor payments, and multistate payroll capability. While Patriot Payroll doesn’t include a lot of extras, small businesses that are looking for an easy way to pay employees and payroll taxes will appreciate its simplicity. Patriot Payroll may not be as well known as some of the other payroll applications highlighted here, but they offer many of the same features.

managing payroll for small business

managing payroll for small business

Maximize your time at the forum by participating in this special Monday session. With the right strategies in place, businesses can maximize productivity and cost savings while maintaining compliance and employee satisfaction. Additionally, businesses not registered in the state where the employee works may face challenges in complying with state income tax withholding requirements. This means that if an employee resides in one state but works remotely from another, the employer is responsible for withholding state income taxes according to the work location. This balance between work and personal life can result in employees feeling more refreshed and focused during work hours, translating into higher productivity levels for the business. Moreover, remote work allows employees to better manage their work-life balance.

This form is due January 31, but if your FUTA payments were on time, you have until February 10. If you owe more than $500 in FUTA taxes, you need to pay them on the last day of the month at the end of each quarter. However, if you owe less than $500 in a quarter, you don’t need to make a deposit—the amount will roll over to the next quarter and you’ll owe a deposit once the total is at least $500. But small company payroll can involve other taxes that you should keep in mind. You are required to pay State Unemployment Insurance Taxes, no matter which state you operate in.

As you can see, there are a lot of steps involved in learning how to do payroll for a small business yourself. So it might make sense for you to use the help of online software or accountants. The Form W-2 needs to be completed for every employee as part of your annual year-end payroll. The form is used to report yearly wages for your team, as well as deductions and tax withholdings. You will need to send a copy to each employee, the Social Security Agency, and your local tax department by January 31 annually. You are responsible for FICA payroll taxes, which are the same as an employee’s rates (Social Security 6.2% and Medicare 1.45%).

These features make payroll tools a step up from running payroll manually with a spreadsheet. Paycor is a full-service HR platform that supports companies from recruiting to termination. Signing up for the free trial was simple, taking only a couple of minutes.

  1. The initial dashboard offers key summary information and links, such as time-off and sick-day calculations, paycheck stub links, a task list and a time tracker.
  2. Pricing for both Paychex Flex Select and Paychex Flex Enterprise are available directly from the company upon request, with an option to request pricing available on the Paychex Flex website.
  3. Depending on where your business is based, you may need to get a state-level EIN on top of your federal EIN.

In addition to a federal EIN, you may have to register your business in your state and get a state ID number. This number will be used when you pay state taxes for income and employment (nine states have no state income tax). You can check whether you need a state ID number by using the Small Business Administration’s state-by-state resource. At the same time, check with an accountant or attorney about whether you need to apply for state withholding and unemployment insurance accounts. You can manage payroll manually on your own or with the help of payroll software or a third-party payroll service. While you can handle payroll yourself, we recommend finding an affordable payroll software or service to handle it for you to save time and headaches.

Staying informed and proactive in your compliance efforts will help you avoid costly consequences down the road. Registering your business with the tax authorities in each state where you have remote employees establishes your tax nexus in those states. Tax nexus refers to the connection between a business and a state that requires the business to collect and remit taxes. By registering in each state, you make sure that you’re meeting your tax obligations and avoiding any legal issues related to non-compliance. For small businesses with remote workers in states that have reciprocity agreements, understanding and complying with these tax rules is essential. As an employer, you need to be aware of which states have these agreements in place to guarantee proper tax withholding for your employees.

The platform also calculates, withholds and remits payments, then files your taxes on the federal, state and local level. Finally, for employees, it will manage your unemployment taxes and claims on your behalf. TriNet can handle all payroll tax administration for you, offering the option to outsource your payroll function to its PEO service. When you do, its team of HR experts not only manage your payroll and tax administration for you but is available to your company for consulting and problem resolution.

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