To save time, ensure your business is compliant, and to avoid potential tax penalties, consider partnering with a payroll expert.
Managing payroll can be a headache. Dealing with turnover and new hires, calculating payroll taxes, and ensuring employees are paid on time are enormous responsibilities with severe consequences if they are mishandled.
Business owners may be tempted to handle payroll themselves in an effort to keep costs down, but it is not something that should be taken lightly. Mistakes can incur tax penalties. "Business owners may not understand all of the complexities involved with staying compliant, and how difficult it can be to keep up-to-date with tax and labor laws, which are always changing," says Connie Payne, senior vice president, treasury management products and services at Regions Bank.
In fact, federal tax laws and regulations are now more than 10 million words long! "Because small business owners wear so many hats in their organization, we encourage them to align themselves with a subject matter expert, such as a certified public accountant (CPA) or HR company to help them stay compliant, efficient, and productive," says Payne.
Should you outsource your payroll processes?
When the first employee is hired, it's time to create a payroll process. As you consider assigning in-house staff responsibility for payroll, remember that every step of the process takes time, from setting up employees in the system to answering their questions.
Think about the resources your company will need to effectively manage the process, from potential staff to software. Bear in mind that even when software seems turnkey, it still requires some segregation of duties and review of entries to ensure appropriate risk management. It also requires a general understanding of payroll laws and when to consult a payroll professional for advice. For example, you will need to have a good understanding of which employees are eligible for and should receive overtime pay.
Also, consider what employees could be doing with their time if they didn't have to worry about handling payroll—not to mention the potential reduced margin for error on payroll reports and reduced tax penalties potentially afforded from outsourcing, since many payroll companies file the necessary tax forms on your behalf, or work with you to make sure you don't miss important tax deadlines.
Payroll service providers can handle all of the tasks associated with payroll, from calculating payments and taxes to direct deposit for your employees and filing the necessary reports with the government. Many also provide online access so you or your CPA can access important documents like your payroll reports and W-2s any time.
Payroll is complicated. Consider talking to your small business banker about the benefits of partnering with a payroll company and payroll professionals to make your payroll processes run more smoothly and help shield you from potential tax penalties.
