How to Hire (3/3): Payroll and Taxes

Before you extend that first job-offer to your employee, you need to figure out how to pay them.  There are plenty of decisions to be made about payroll–one of the most important decisions is who will run your payroll for you.

Brace yourself here: There are more options than you have hours in the day.  If you want some help, check out our list of payroll providers.

While we can’t tell you which service to choose, here’s some good things to consider as you figure out what you’re going to do.

Who is going to manage the quarterly withholding, tax filings, and annual returns at the Federal, State, and City level?

This is an important item to consider because individuals who want to do this themselves take on all the tax liability associated with filing these returns, tracking records, and withholding the correct amounts from employees.   If you choose a third-party, they may or may not take on the liability associated with these filings.  The truth is that only a CPA or a CPEO take on the full tax liability associated with correctly filing your taxes.  Little Fish is proudly partnered with ADP so that full tax liability is removed from your business starting the quarter that you sign up with us.

Which States/Cities do you need to set up withholding accounts for? 

This is important for you to determine early on.  You not only need to setup withholding accounts with each city in which you do business, but also in each state and at a federal level. If you have a multi-state payroll, you will need to file with both states in order to make life easier on your employees.  In addition to setting up your income tax withholding account, don’t forget you need to withhold Medicare and Social Security taxes (as well as pay your employer portion).

Don’t forget your insurance!

Lastly, don’t forget your unemployment insurance at both the Federal and State levels.  These are mandatory for you to pay on behalf of your employees–and this is not something that you withhold from their checks.  Each state sets the taxable limit of wages, so be sure to check with your State’s department in advance and figure out what your unemployment rates and wages will end up being.

As a bonus tip: Have worker’s compensation insurance to protect you in the circumstance that your employee is injured and/or off work due to a job-related injury or illness.

In conclusion, as you consider the many decisions to be made with payroll, do a quick search and figure out solutions that work for you.  You can always contact Little Fish if want to outsource the hassle to a professional that cares about your business.

Please comment below and let us know what topics we can cover to help your small business.

 

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