Paying your employees can be a challenge if you never done payroll personally or this is your first time hiring an employee. There are several ways to pay your employees:
1. Hire a Bookkeeper/CPA and let him/her prepare the checks for your employees. Some of you may choose this option because your Bookkeeper/CPA is knowledgeable to handle all your payroll needs and answer all your questions related to payroll. Did you know that just because you pass on your payroll function to your Bookkeeper or CPA, it does not exempt you from all the mistakes that was done by him or her. According the IRS and state government, no matter who is handling your payroll function, it’s still the SOLE Responsibility of the employer. Even if you end up firing your CPA/Bookkeeper, the Employer will get slapped with all the fines and penalties. This is the reason why you must educate yourself at least in understanding the basic process of payroll, so you can avoid all of these penalties, etc.
2. Outsource your payroll duties (e.g. ADP, PayChex, Intuit, etc.). This option has become quite popular in recent years because many small business owners usually have fewer than 5 employees in the first several years of operations. Many of you will outsource this payroll function because you are too busy doing what you do best, which is running their business, making sales, etc. One piece of advice for you, even though you’re handing off the function to a big name payroll company, you should definitely take 15-20 minutes to review the payroll reports on a monthly basis. This is to ensure that the payroll company is processing all the necessary checks and filing the forms accurately. If you find an error, you can contact your payroll company to adjust it immediately. I seen many employers that don’t review their reports and relying solely on the payroll company, they often find many of the errors at the end of the year or when it’s time to provide the w-2s to the employees. That can cause a major headache to the employees who wants to receive their w-2s on time. When the employer finds the error, it may be too late and penalties are already coming to them. It would have been too late do anything except amended returns, which can be a pain if you never done it before. My only advice here is to REVIEW, REVIEW, REVIEW all the reports.
3. Process and prepare the checks in house or by yourself – Many small business owners want to do this function themselves usually during non business hours; however, they don’t have the basic knowledge to complete this process. They go to a retail store Office Depot, Office Max, etc. and ends up buying a payroll software off the shelves. The software ask them to setup the company profile, deductions, Federal Employer Identification Number and the State Employer Identification Number, State Unemployment Number and rate, etc. As you go through the setup, there are many unknown terminologies and some of the information are setup incorrectly. Please read all the details in the software or get assistance from the software provider to see if they’ll be able to assist you with the initial setup before you process the first payroll. This will eliminate some of the problems in the long run. There are many stand alone softwares out there including Quickbooks and Peachtree and Internet Payroll Services that are becoming very popular. My advice is to make sure you understand the entire payroll process before attempting to do this by yourself or make sure the software you purchase has a LIVE payroll customer service agent with a phone number, so you can contact them for questions. If there are no phone numbers on the software box for customer support, then you’re just asking for trouble.
