162: Understanding Payroll In Your Business Whether You Are Starting A Business Or Side Hustle
162: Understanding Payroll In Your Business Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant, Business Owner, Or Self-Employed
Payroll might not be the most glamorous topic, but it’s a large part of your business if you have employees. If you don’t have any employees yet, understanding how to add payroll to your business will be extremely important. When you have employees, you need to create a process of paying your employees, ensuring they receive their money on time and that you, as the employer, follow through with and fulfill all your obligations. In today’s podcast episode, I walk you through some of the most important aspects of processing payroll for your business. You need to understand these topics, whether you are going to process your own payroll or you are going to outsource your payroll and hire someone to do your payroll for you. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA, there’s a lot to know about payroll, but once you have a general understanding, it is pretty simple to understand…
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Show Notes:
Payroll might not be the most glamorous topic, but it’s a large part of your business if you have employees. If you don’t have any employees yet, understanding how to add payroll to your business will be extremely important. When you have employees, you need to create a process of paying your employees, ensuring they receive their money on time and that you, as the employer, follow through with and fulfill all your obligations. In today’s podcast episode, I walk you through some of the most important aspects of processing payroll for your business. You need to understand these topics, whether you are going to process your own payroll or you are going to outsource your payroll and hire someone to do your payroll for you. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA, there’s a lot to know about payroll, but once you have a general understanding, it is pretty simple to understand…
Welcome Back…Understanding payroll doesn’t have to be complicated, but I do want you to realize that payroll is totally different from other aspects of the bookkeeping you do for your business. When you add an employee to your business and start paying them, you need to have a good understanding of how payroll works within your business. Knowing the responsibilities payroll brings to your business is an essential part of being a business owner because no matter how you have your payroll processed, you, as the business owner, are ultimately responsible for your payroll obligations.
Let’s begin with what you need to do when you are ready to hire your first employee. You need to make sure you have your Federal and State ID numbers set up, and you’ll need to get the proper information from your employee. You will have your employee fill out a W4 form and an I9 form to get this relevant information and ensure they are eligible to work for you. These forms will dictate how much you should be withholding for payroll taxes as well. You may have other state or local requirements that need to be met, so make sure you check with your state for any additional requirements. Make sure you are up to date on any minimum wage and overtime regulations by checking into The Fair Labor Standards Act and setting your rate of pay for your employees as well as any benefits you may be offering to them.
Before you start paying your employees, you will need to set up a pay schedule. Will you be paying your employees on a weekly, bi-weekly, semi-monthly, or monthly basis? Once you have this established, you will follow this schedule so that your employees are paid on a timely basis. You will start by calculating your employee’s gross payroll. This is done by taking the number of hours they have worked and multiplying these hours by their hourly rate. When you calculate your employee's net pay, you will start with their gross pay and then take into consideration any federal, state, and local payroll taxes that need to be deducted. You will also deduct Social Security and Medicare taxes. These taxes will be paid by both your employee and you as the employer. If you have any additional deductions, you will take these into consideration as well when calculating your employee's net pay.
Now that you’ve deducted payroll taxes from your employee’s paycheck, you need to make sure you are remitting these taxes on time. Payroll taxes are what most business owners struggle with. Any payroll taxes you withhold from your employees will need to be paid to the appropriate agency and will need to be paid on time. There are specific due dates that you need to follow when you are paying your payroll taxes, and they are based on the total payroll taxes you need to pay. Not only will you remit the payroll taxes withheld from your employee’s paychecks, but you will also need to remit your employer’s portion of the Social Security and Medicare taxes. Both the employer’s taxes and the employee’s taxes will need to be paid according to your payroll tax deposit schedule.
You, as a business owner, will have your employer’s portion of the Social Security and Medicare payroll taxes that are accumulated with each payroll you process. Additional employer taxes also include Federal and State Unemployment taxes as well. These taxes are collected to fund unemployment insurance and are based on your employee’s gross payroll. These additional employer payroll taxes are generally due at the end of each quarter and may have reporting requirements depending on your state.
At the end of each quarter, you will be required to file the necessary quarterly reports needed for your business. The Federal 941 form reconciles the amount of Social Security, Medicare, and other taxes paid with the total tax due. You will more than likely need to file a similar report with your state for any state and/or local income taxes withheld as well. These reports will let you know if you under or overpaid any of your payroll taxes.
At the end of each year, you are required to file an annual Federal 940 report, which reconciles your Federal Unemployment tax paid with the total tax due. You will likely have a state report that will reconcile your yearly state and local income taxes. You will also need to issue a W2 for each employee, which will show how much you paid your employee as well as how much was withheld from their paychecks for taxes and any other deductions. These W2 forms will be sent to the Social Security Administration, your state, and your employees. All of your payroll reporting is done on a calendar year basis, and everything is reset at the beginning of the next year.
Adding payroll to your business is a big responsibility, and you want to make sure you are doing it right. If you are thinking that you need additional help with your payroll processing, make sure you get the help you need. Most business owners do not process payroll entirely on their own. They utilize a payroll solution to help keep them in compliance, ensure their payroll is calculated correctly, and that their employees and taxes are paid on time. Another benefit of using a payroll solution is offering direct deposit to your employees. Most employees utilize this option, and some may even ask for you to provide it to them as an additional benefit.
If you are considering outsourcing payroll to a professional who specializes in it, you could save yourself time and money in the long run, but if you are looking for a payroll processing solution for your business where you process the payroll yourself, I recommend looking into ADP’s solutions. ADP has been one of the leading payroll processing solutions for years. Some of the main reasons I feel ADP works for so many small businesses are simplified setup, ease of use, integration with your existing bookkeeping system, automatic payroll tax payments and compliance, security, and the ability to grow with your business. If you are interested in learning more about ADP, you can go to www.FinancialAdventure.com/ADP for more information.
Understanding how payroll works in your business isn’t just about meeting legal requirements; it’s also about taking care of your employees. If you are unable to do this, you’ll find that your employee morale may plummet, and they may leave you for a more reliable employer. When you understand how your payroll works, as well as the liabilities it creates in your business, you won’t find yourself struggling with cash flow issues. By having a consistent payroll schedule and knowing when and how much you need to pay for your payroll liabilities, you'll be able to forecast your expenses and improve your financial stability. Payroll can be stressful for business owners, but it is my goal to help you eliminate stress whenever possible so that you can continue to enjoy doing what you love most in your business.
If you need help with getting a better understanding of how payroll is impacting your business or if you are unsure of what you need to do next in your business regarding payroll or other areas that are causing you stress and overwhelm, I’m here to help. My clients are able to reduce their stress and overwhelm, understand how to master their small business finances and develop solutions to grow their bottom line. I encourage you to take the next step by signing up for a free consultation where I’m going to teach you the first step in my process so that you can eliminate stress, overwhelm, or overworking in your business while you continue to get done what matters in your business or career so that you can live your life with joy, purpose and a more fulfilled life. Feel free to reach out to me with any questions you have; I’d love to help you on this journey. You can schedule your free consultation or sign up for a coaching session today. As a Certified Public Accountant and Certified Life Coach, I can help you set goals and develop a plan that will allow you to lead a happier and more sustainable life in your business, career, or your personal life. I’m here to guide you through the financial aspects of your business and help you focus on the strategies you need to follow to reach the success you want to achieve in your business and stay committed so that you can continue to keep pushing forward. I’m here to help you with both your business and your personal life so you can relieve the stress, anxiety, or overwhelm you are currently feeling. Having an accountant and certified life coach like me can provide you with valuable insights and ideas to help you simplify your business, which enables you to go back to enjoying your business like you thought you would when you first started it. I work with business owners, accountants, and other financial professionals to create the actionable steps they need to take to ultimately achieve their goals while getting relief from the stress and overwhelm they feel from the pressure of owning a business, deadlines, and the workload they face every day. If you are struggling with this as well and would like some help developing a solution, help strengthen and maintain your emotional health, increase your well-being, create a more positive, happy, and joyful life, set and achieve your goals, and manage your relationships, I’d love for you to join me in my Balance Life Coaching program so that you can live a more purposeful life. Each week, we meet privately one-on-one, and you get to bring whatever is on your mind on any given week. 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Why would you want to wait? Make this investment for yourself. Take the journey with me…make it happen for yourself. Ask yourself why you need this program in your life right now. Are you ready to make bigger, bolder, stronger life goals? I’m looking forward to meeting with you soon and digging deeper to see where you currently are in your business or career and start creating actionable steps so that you can reach your vision and goals for the future, not only in your business or career but also in your personal life. I’m ready to work with you, see all of your successes, and watch you thrive in your business or career while creating your best work-life balance. I’ll post links to this and other valuable resources for business owners and accountants where you are listening to this podcast.
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