5 Basic Payroll Tips | Planning, Organizing, & More

5 Basic Payroll Tips to Start the Year Out Right

This year, you want to get your payroll right. Whether you are a seasoned employer or running your first payroll, there are always things to learn and do.

To help you with basic payroll, here are five tips to start your year out right.

1. Know your tax deadlines

There are a lot of forms to fill out when it comes to payroll taxes. Of course, every form has a different due date.

The beginning of the year is a great time to figure out which forms apply to your business. Common payroll forms include Form W-2 (Wage and Tax Statement), Form 1095-B (Health Coverage), and Form 940 (Employer’s Annual Federal Unemployment Tax Return).

Once you know which payroll forms you need to fill out, you need to find out their deadlines. Most forms are due either annually or quarterly. Missing deadlines can lead to penalties.

2. Organize your files

Keeping your payroll records organized is extremely important. The IRS requires you to keep your payroll records for certain lengths of time. The amount of time depends on the type of record.

Organized records are a must on a regular basis, too. Payroll records can help you fill out quarterly and annual tax forms. When it gets to the end of the year, will you remember where you put payroll records at the beginning of the year?

If you do not have a filing system already, create one now. No, a shoebox or your top desk drawer are not enough.

Find a system to neatly organize all your records. For example, you could use a filing cabinet. Or, you could use the cloud to store digital files online that you can access from anywhere. There are many services that can help you store payroll records in the cloud, including Patriot’s payroll software for small business.

3. Make hiring plans

Are you planning to hire more employees this year? Don’t let hiring wait until the last minute. Even if you are not hiring new employees at this time, there are things you can do to prepare.

Make sure you have all the forms you need on hand. This can include Form W-4, state forms, and benefits applications.

Also, make sure that you have a new hire onboarding process. This plan will help you remain organized and will help new employees better integrate into your business. Things that might happen during onboarding include employee orientation and entering basic payroll information into your software.

4. Classify workers properly

Deciding if a worker is an independent contractor vs. employee can be difficult. However, it is extremely important to correctly classify each worker. If you misclassify a worker, you could face IRS penalties, and the worker might miss out on valuable wages and benefits.

To determine a worker’s classification, you should use the economic realities test. The IRS test for independent contractors looks at six things:

  1. Is the work related to the business?
  2. How permanent is the worker?
  3. How much does the worker invest into the work?
  4. How much control does the employer have?
  5. Does the worker have opportunities for profit and loss?
  6. How much skill and judgment does the worker need?

If you misclassified a worker in the past, you might be eligible for the Voluntary Classification Settlement Program (VCSP). This program allows you to reclassify your worker with partial relief from unpaid federal payroll taxes.

5. Make sure your basic payroll process works

The way you ran payroll last year might not work for you now. You might have added employees. Or you might have less time to manage payroll on your own. The beginning of the year is a great time to change how you run your business’s basic payroll.

If you are not currently using online payroll software, you should consider it. Online payroll software is often low cost. It is also securely stored in the cloud and accessible anywhere with an Internet connection.

Are you looking for payroll software to use? Try Patriot Software’s Full Service Payroll. We don’t require you to sign a long-term contract for our payroll services. Get a free trial!

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