Are you a small business owner thinking of hiring an employee and not sure what that entails? Here is some information on what you’ll need to do in order to process payroll.
- Obtain an Employer Identification Number (EIN) – This is needed to report taxes and file reports. Click to apply here.
- Obtain State/Local IDs if Applicable – States usually use different account numbers than the IRS, so you probably need to apply with the state to set up an employer account.
- Have Employee Paperwork Completed- All new hires need to fill out a W4 form, verify employment eligibility by completing the I-9 form. You may also have additional notifications you must give when employment commences such as information for pay dates, how wages are calculated, vacation/sick pay policies, and/or a handbook.
- Set a Pay Period – Most states require at least semi-monthly payments (24 pay periods per year), but you can have bi-weekly (every other week – 26 pay periods) or weekly (52 pay periods)
- Choose a Payroll System – Will you process the payroll yourself by hand, with the help of software, or outsource to a payroll provider? Each method has a different cost and amount of time it will take you to perform this duty.
- Report Payroll Taxes – As a new employer, your tax deposit schedule will most likely be monthly (very few qualify for quarterly payments). There are several payroll tax reports that will be required on either a quarterly or annual basis.
- Keep Good Records – Federal and some state laws require that employers keep certain records for specified periods of time. Set up a process to maintain required documents such as W4 or I-9 forms, payroll reports, and vacation/sick pay documentation.
- Acquire Worker’s Compensation Insurance – In the event your worker is injured on the job, this will cover medical expenses, loss of wages, and/or additional costs due to the injury.
If you are unsure how to handle the payroll set-up or are not interested in doing the payroll processing yourself, contact us today. We are here to help!