One change that could simplify payroll for small businesses

As a small business owner with one employee (me), one of the most surprisingly complex aspects of running a business has been payroll management. you’re right. Just processing paychecks and calculating withholdings was a headache for me.

Getting the numbers right isn’t easy when estimating payroll tax withholding for state, federal, and FICA taxes. And it’s important to get the numbers right. You don’t want to underpay the tax authorities.

For many years, I outsourced my payroll to an accountant who handled my payroll and made sure my quarterly taxes were paid. Then I switched to using payroll software after my accountant stopped providing this service.

If you’re a small business owner who’s still doing payroll manually or your accountant doesn’t offer payroll processing services, switching to payroll software is a big move you need to make.

Here are a few reasons why payroll software will make your life as a small business owner so much easier.

1. Payroll software gives you accurate numbers.

I own a company, so my payroll process is easier than most companies. But if you have fewer employees, the complexity multiplies. You must ensure that the following amounts are accurately withheld from your employees’ paychecks each payday:

• federal income tax
• State income tax (if your state imposes income tax)
• Local income tax (if applicable)
• Actual “payroll tax” withholding (Social Security and Medicare, etc.)

These calculations are not simple and depend on the employee’s income, number of dependents, and choice of W-4 ​​withholding form. Every employee in your company may have a different tax withholding amount on their pay stub. Do you really want to track all of this through manual processes and spreadsheets? I’m not!

2. Payroll software integrates with tax authorities.

The best payroll software makes it easy to withhold taxes from your paychecks as needed, as well as ensure that those taxes are remitted to federal, state, and local (if necessary) government taxing authorities.

It can be a great comfort to know that you have an experienced and reputable payroll software company to help you pay your taxes on time. My accountant used to do all this for me and it worked great. I haven’t had any problems.

But when I first had to start managing my payroll, I quickly ran into problems with my state tax department. I had to call and talk to an employee to make sure I had the right account numbers for the right taxes and that my payroll software worked with the state system.

When I told the tax department the name of my payroll software, they immediately recognized the brand. “We work with that company all the time, you’ll be fine,” they said. As a small business owner, the last thing you want is to have tax issues. Good payroll software makes doing your taxes more seamless.

3. Save time with payroll software

As a small business owner, think about the value of your time. How much money do you make in a year? Divide that number by 1,000 and then again by 2. This is your hourly “rate” for the value of your time. So, if you made $200,000 last year, your time is worth about $100 per hour. If you spend 5 hours a month fiddling with your manual payroll process, it’s costing you $500 a month! And it’s not even fun!

Instead of wasting time on embarrassing and unsatisfying payroll activities, leave it to the experts. Good payroll software costs much less than the time it saves. This is an investment in a business that pays emotional dividends as well as financial rewards. And many of the best payroll software tools now have great mobile apps, so you can run payroll anytime from your phone. No spreadsheets or number crunching required.

4. Payroll software makes it easy to find electronic records.

One reason I like my payroll software is that it sends me email receipts every month (and every quarter) with monthly, quarterly, and yearly running figures for my payroll tax withholdings. It’s easy to save these electronic records and keep all your tax information in one place. No more paper, no more file folders, no more filing cabinets taking up too much space. Electronic records make your business books much simpler.

5. Payroll software can make tax time less stressful.

Want to better plan for tax season? Payroll software can also help. The best payroll solutions typically integrate with the most popular accounting software, so you can keep accurate, up-to-date records of taxes paid, amounts paid to employees, and other details.

Tax planning has become much simpler with payroll software. Because I can see how much I pay in federal and state income taxes all year long. This can help you plan ahead for the extra money you need to save or other favorable tax moves small business owners can make, such as putting more cash into a SEP IRA or other retirement account.

conclusion

Unless you’re a payroll enthusiast who likes to manually calculate FICA rates and income tax withholdings, I don’t see why anyone would still be running their own payroll in 2024. If your accountant offers payroll processing as an additional service, seek professional help. Or try one of the best payroll software solutions. Payroll software can save you time, money, and make you happier with your paycheck all year long.

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