Are You a Small Business Hiring Employees? Do It Right the First Time

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Are you a new business owner, a small business owner, or a solopreneur planning to hire employees? Perhaps you're all confused about where to begin? How much taxes should you withhold from their wages? What are you responsible for as an employer? Let me help you discover the fundamentals.

The three basic forms you need to have your new employees complete are:

* Federal Form W-4, so they can indicate their filing status and the number of exemptions they want withheld from their paycheck

* Form I-9 to verify their identity (be sure to keep a copy of their government or State issued ID on file) and

* Your respective State form W-4 (check with your state revenue department). For example, in New York, employees have to complete Form IT-2104 to indicate their filing status and the number of exemptions they want withheld at the State level.

Check with the Department of Labor in your state to find how to register as an Employer. Once registered you will be required to report all new hires. Find out if there are any additional requirements in regards to Unemployment Insurance, etc.

The standard taxes that should be withheld from each paycheck are:

* Federal Income Tax

* Social Security (for 2011 this rate is 4.2% of the first %106,800 of the employee's earnings). The employer portion is 6.2% and is payable every quarter.

* Medicare Tax (1.4% of the employees earnings. The employer portion is also 1.4% and is payable every quarter.

* State Income Tax

* Local Income Tax if it applies. For example, in NYC, employees are required to pay local income taxes.

* If it applies, you may also be required to withhold UI (Unemployment Insurance) and/or SDI (State Disability Insurance).

Quarterly Filings - file Federal Form 941 with the IRS and check with your State Department of Revenue to find out which forms you are required to file every quarter.

Annually - file Federal Form 940 with the IRS and file Federal Form W-2 and transmittal form W-3 with Social Security and be sure to issue your employee(s) their copies of form W-2 no later than January 31 of the following year.

It is important that you keep adequate records to remain in compliance with the IRS plus you will need this information at tax time. It would be to your advantage to set up an employee database.

Resources: You may want to download the IRS Employer's Tax Guide, Publication 15 from the IRS website.

You may also want to check into some web based payroll calculators like http://www.paycheckcity.com/ to help you with your calculations.

A veteran tax consultant and coach with over 20 years of experience under her belt, Ktasha Nicole Hardge is the owner, founder, and CEO of Hardge Connections, LLC. Hardge is a payroll service provider and small business specialist who educates her clients with her tax preparation expertise and tax compliance for mid- to high-income taxpayers and small business/home business owners Nationwide.

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Reduce Costs by Hiring Online Payroll Services

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Payroll is the amount of money which is spent by the company for paying the wages of all employees every month. Big organizations have their in-house payroll department that makes complicated and time-consuming payroll calculations for all the employees. However, small or medium-sized companies do not make an investment in setting up another department but assign duties to the administration department. The lack of knowledge and expertise in making complicated payroll calculations which are also compliant with latest payroll tax laws leads to errors.

In order to eliminate errors due to human involvement, online payroll services are introduced wherein calculations are done by automated payroll software to give timely and accurate results. The reason is because every employee anxiously waits for their salary and incentives, and desires to get paid on time. Inability to pay timely and accurately results into loss of trust of employees for the organization.

Hence, small to mid-sized businesses are hiring online payroll services to relieve themselves from all tensions related to payroll. There are many service providers who provide SaaS-based payroll system wherein data of each employee is put into the system to calculate the gross salary amount by making necessary deductions each month. However, it is not necessary that every employee has similar pay period and can be weekly, biweekly and monthly. Therefore, it is important to segregate the number of employees in terms of their pay period. The gross income calculated at the month-end can vary each month by considering overtime, compensations, commissions and other incentives.

Once the gross salary is calculated, the online payroll service provider calculates the amount to be deducted in terms of Federal, Local and State payroll taxes. The accuracy in calculating, paying and filing of payroll taxes is vital to avoid any type of complications, penalties and notices by the IRS department.

While you have outsourced payroll services, you can be sure of the accuracy of payroll and payroll taxes. Even if the company receives any notice by the IRS department, the notice is sent to the service provider to tackle directly with the concerned department. This ensures that these companies are efficient in carrying out payroll calculations and are responsible for any type of notices due to late payment or inaccurate payroll tax payment.

If you want to save your precious time and want to stay away from complexities involved with payroll process, you can also rely on a reputed online payroll company. This will not only help you to avoid errors but will help you to keep your employees and administrative department satisfied.

To learn more about Payroll, visit Payroll Services.

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