6 Steps For Setting Up Payroll For Your Small Business


Step 1 
Get an Employer Identification Number (EIN) from the IRS.
Employer Identification Number is also called Employer Tax ID. You can apply for an EIN if your business is in the United States or U.S. Territories. A valid Social Security number is required. You must finish the application in one session. If more than 15 minutes of inactivity go by, you will have to start the process again. After all your information is validated, you will immediately receive your EIN. You will be able to download, save, and print your EIN confirmation notice.

Step 2 
Get a local or state business license, which comes with a tax ID number for taxes, if necessary. Contact your local government agency to see if you need a state and local business license.

Step 3 
For each employee, you need to collect some essential information. You can create a form yourself or find one online. Here is the information you need to obtain:
-Full name
-Employee start date
-Social Security Number
-Date of birth
-Current address
-An agreed-upon wage
-Form I-9 to verify eligibility to work in the U.S.
-W-4 for employees or a W-9 for independent contractors
You can e-verify the I-9 form online.

Step 4 
There are three classifications of employees.
-Independent contractors
-Full-time employees
-Part-time employees
For independent contract workers, you do not withhold taxes. Full-time and part-time employees have taxes withheld from their checks. Fill out form SS-8 if you are unsure how to classify your employees.

Step 5 
Set the payday for your employees. Check to see if your state has requirements around paydays. You need to determine what works for you and your employees. You could pay them weekly, bi-weekly, or monthly. Make sure your employees know their pay date(s), so they can plan accordingly.

Step 6 
You need to choose a payroll system. There is a lot of payroll software online. Do some research to see what best fits your style. You can do payroll yourself or outsource it. There are a few points you need to keep in mind when processing payroll.
-Payroll must be done on time every time. Sticking to a regular pay date will help you stay on track.
-Pay your employee taxes to the IRS on time. You can choose to pay monthly or bi-weekly. Failure to pay on time can result in a 15% penalty.
-Payroll is meticulous work. Make sure you double check your numbers. Mistakes can cost you a lot of time and money.
-Organize and find a safe place to keep your employees private information. Keep all records for at least four years. Being audited is not fun, but if you keep your files in order, you will have no worries.