15760 Ventura Blvd, Suite 610 Encino, CA 91436
15760 Ventura Blvd, Suite 610 Encino, CA 91436
Personal, Affordable Payroll Services, Bookkeeping, and Tax Processing for Small Business throughout Los Angeles County.

Small Businesses: Tips for Creating Efficient Payroll System

It’s important for small business owners to understand the more detailed aspects of their business so as not to incur government penalties. It doesn’t matter if a small business has one employee or 49; making sure a proper and timely payroll system is in place is imperative to worker morale and being mindful of responsibilities, such as withholdings and taxes.

small business accounting payroll tips

The U.S. Small Business Administration (SBA) offers some helpful suggestions for new small business owners looking to ensure their payroll systems are following regulations and have the most efficient processes.

Here are some of their suggestions:

  • Contact the IRS to secure an Employer Identification Number (EIN) prior to hiring any employees. This is also sometimes known as Form SS-4 or Employer Tax ID. This is needed to report taxes as well as employee information to the state. Apply online or contact the IRS. (You may also need a state or local ID, depending on state.)
  • Learn about the differences between an independent contractor and an employee. The legal differences between the two are vast. Taxes, Social Security and Medicare are withheld differently. The IRS can help employers determine the status of an employee by filling out a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
  • New employees must fill out a W-4, or Federal Income Tax Withholding Form. This determines how much money your business withholds from the employee’s pay for tax purposes.
  • Determine how your business wants to handle paid time off. It’s not a legal requirement, but it is offered by most companies. Also, will you pay overtime? How will you track employee hours? Will your pay periods be bi-weekly or monthly? Also health plan premiums and retirement will need to be considered and withheld from paychecks. Payroll is an extremely tricky and detailed process, and maybe businesses prefer to outsource this work to payroll partners who are aware of the latest legislation and requirements involved in payroll processes.
  • Remember to keep certain forms on hand, such as W-4 forms for active employees as well as for terminated employees (for a three-year time period post-termination). Also save filed tax forms, W-2 forms and dates/amount of all tax deposits.

The IRS provides an Employer Tax Guide for business owners. However, it can be easier to outsource accounting, payroll and taxes services with a payroll partner like ATPP. ATPP specializes in small business and small business accounting in Los Angeles. To learn more about ATPP, click here or call (818) 436-2775).