Can I do my own Payroll?
Yes, you can run your own payroll, but most small businesses shouldn’t.
You can save a few hundred dollars today by running payroll without software, but you’ll later pay much more in fees. Rather than using payroll software or services, many small business owners do payroll manually to save money. It almost always costs them more in tax penalties in the long run.
Simply put, you shouldn’t do your payroll on your own. It’s more complex than writing a few checks every two weeks on your own. It also includes withholding federal, state, and local taxes, sending those payments to the IRS and your state, and filing your tax forms on time. Those things still apply even if your business is just one employee. Keeping track of state and federal tax deadlines, filing all the right forms, and paying the IRS and your state the right amount is a large uptaking for any small business. Using a payroll service will not only save you time but also save you money in the long run.
Benefits of Payroll Services
Lower Your Risk of Error
Don’t let errors happen to your payroll. Those who do manual payroll are more likely to make mistakes than those who use payroll services. When you outsource your payroll, you are utilizing professionals who have many years of experience doing payroll full-time. They know the inner workings of the payroll industry and can save you from making a costly mistake.
In most cases, employees are paid biweekly. You might even have some salaried employees paid biweekly while others are billed weekly if you have both salaried and hourly employees. No matter how you look at it, that’s a lot of payroll time spent running payroll. Payroll taxes also require monthly deposits which can require some complexity and opportunity for mistakes. Instead of spending those hours on payroll, you could use them to do more significant work like growing your business.
Avoid Legal Repercussions
Missing payroll tax payments can have serious consequences for you. If you ignore payroll taxes for long enough penalties can lead to more serious issues. As a result of ignoring those penalties, the IRS may also take the following actions:
- You will be taken to court
- The bank will seize your money
- Liens will be filed against you
- The sale of your business
Depending on the circumstances, you may even face jail time if the IRS files a criminal lawsuit against you.
Keep Headaches at Bay
Manual payroll can be particularly frustrating and labor-intensive. There are a lot of state and federal rules you need to follow before you can send a check to all your employees. Manual Payroll processing by hand will almost certainly take longer than payroll processing by software. Where a payroll service can calculate payroll tax in seconds, and you’ll need at least a couple of hours if you’re careful. Why add stress to your plate when you could take it off?
If despite knowing all the benefits of using payroll services you still decide to run your payroll manually, there is a lot of information you will need to have. In order to run payroll for your small business, you will need the following information:
- Employer Identification Number
- State Tax Information
- Employee Information including pay rate
- Records Keeping System
The IRS will be able to identify your business if you have an Employer Identification Number (EIN). By having your employees fill out a W-4 form, you will be able to collect all the necessary information. To process payroll, you need this form to determine the employee’s filing status and personal allowance.
You will need to choose a payroll schedule once you have the relevant information for all your employees. Your business can schedule its yearly schedule on a weekly, semiweekly, or biweekly basis, depending on how you wish to approach it. Payroll is usually easier to complete when there are fewer pay periods. Be sure to check with your state’s labor laws to see if your state requires employers to pay their employees according to a specific schedule.
Calculating an employee’s net pay is the most challenging part of payroll. You must multiply the employee’s hourly rate by the number of hours they worked to calculate gross pay. Based on each employee’s W-4 form, calculate their deductions and allowances. Benefits and payroll taxes must also be considered. You must subtract the amount withheld from the employee’s gross pay to determine the employee’s net pay. Afterward, pay your employees and keep records.
Small Business Payroll Services
There is no small business owner who enters into business with the intention of managing payroll full-time. Their goal is to grow their business and build their team. Even so, payroll is a crucial aspect of any business. The task can be challenging, and it’s not in many entrepreneurs’ toolboxes, but it must be done correctly. Noncompliance with tax and labor laws, as well as damage to employee morale, can result without a solid process. A payroll service that is intuitive and user-friendly for entrepreneurs is the best payroll for small businesses. Ease of use is the most critical aspect; you don’t want to add extra burdens to a small business owner.
Milestone was built to handle payroll for small businesses and will provide more support than payroll software alone. A payroll software small business can do a lot of the payroll work for you, but logging in and managing compliance is ultimately still up to the business. An outsourced payroll service can provide business owners with a dedicated payroll processing representative who can run reports and make adjustments as needed. Managing the different tax implications for different states is one of the responsibilities of a payroll manager in today’s world with virtual employees living in different states. Business owners can rest easy knowing their payroll is done on time and accurately when new employees are on board.
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