Archive for Operating a Small Business
Do you have employees who receive tips? Did you know, as an employer, you have certain obligations when it comes to the income on your employees’ tips? Do you – and your employees – know that they must report the total amount of taxable tips to you by the 10th of the month following the month after receiving the tips? If your employees don’t know this, you need to educate them.
Generally, your employee’s tips are not taxable unless they make more than $20 per calendar month. If they do make over $20 in tips per month, you’re responsible for withholding income and FICA (Social Security and Medicare) taxes on the employee’s reported tips (all tips, including the initial $20) – even though you don’t have control over the amount of tips your employee receives.
Also, you’re required to pay the employer’s portion of FICA and FUTA (federal unemployment) taxes on these tips. Additionally, you must withhold the 0.9% FICA Medicare surtax, too, if the employee’s tips (in combination with the wages you pay them) exceed the $200,000 withholding threshold.
However, your obligation to pay your employee’s portion of the FICA and income taxes due is limited to the amount of non-tip wages you pay the employee. If your employee’s paycheck isn’t big enough to cover the withholding taxes, you should withhold taxes in this order:
However, if this process still leaves you with insufficient funds to collect your employee’s FICA tax, your obligation to withhold the uncollected portion ends. As for collecting outstanding income taxes, these payroll taxes should be withheld from the employee’s next paycheck.
It’s important to note, if your employee doesn’t report their tips of $20 or more per calendar quarter to you, you can only be held liable for your portion of FICA. This liability only arises when the IRS makes a written notice, demanding payment.
Managing restaurant payroll and the payroll taxes can be complicated, but it doesn’t have to be if you have a payroll services provider like The Payroll Department handling your payroll and taxes for you. We can take the hassle out of figuring out what taxes you owe on the income from your employees’ tips and make these payments for you. Contact us for more information on how we can help you.
-Ariane of The Payroll Department Blog Team
Are you an employer or employee who likes to get that paycheck in your hand every pay period? There are people who like that trip to the bank to make deposits. However, they may be putting themselves – and their employers – at risk by getting that paper check.
It’s not an uncommon event to have paychecks stolen. One small business owner found himself in a pickle. A man simply parked his car at a hotel to have dinner with a friend and when he returned, the bag containing the checks was gone. The thief may not have even known he was stealing checks because they were completely out of sight in a bag. But in any event, the employer now has a big problem that has to be resolved right away. Employees are waiting for their wages.
Entrepreneurs have to take leadership roles and sometimes that means dictating processes that ensure safety and security – like with payroll. And most often in today’s workplace, payroll is paid in one of two ways:
Small business owners have enough to think about to keep the workplace running. In addition to using automatic deposits, more and more employers are outsourcing their payroll to a payroll provider. Not only does hiring out for payroll services ensure accuracy and efficiency, it keep the budget in line.
Employers are realizing that it is just not worth the risk when dealing with taxes and employee wages to keep it in house. The payroll fees are far outweighed by the costs of in-house processing and definitely as protection against error in payroll taxes, reporting and making deposits.
Streamlining the payroll process so that it can be handled virtually from start to finish eliminates the potential of having paychecks stolen from the back of a car during an errand run. And, with it being automated, it can be handled efficiently, which means it is cost effective.
If you are ready to save yourself time, money, headaches and worry, contact The Payroll Department. Let us put our years of experience to work on your payroll and payroll taxes. Outsourcing your payroll may be one the best decisions you make for your business this year. Contact us and let’s set a time to talk!
-Teresa Ray, Founder and Owner
The Payroll Department
Decisions. Decisions. Decisions. As a small business owner, it seems that there are always decisions to be made, and you are the one expected to make them. Determining the frequency with which you will pay your employees is one decision that needs to be made fairly early in the life of your business. Chances are that if you have employees you’ve already made this decision. So how can you be sure that you have made the right choice?
As with many business decisions, a good place to start is by looking at the applicable state and federal law. In this case, there are not a lot of rules that must be followed. Federal and state laws do require that employees be paid on a regular basis. That means that you need to decide how often employees will be paid and then stick to it. A business is not allowed to deviate from its usual pattern to accommodate a seasonal slump or an unexpected expense. In addition, some states have laws setting a minimum frequency at which workers must be paid.
After considering the legal aspects of this decision, small business owners must also take into account the financial aspects. As you may have guessed, it is more expensive to pay employees more frequently. Every time payroll is processed, resources are expended. If a business is doing its own payroll operation, then there is the employee time that is used to calculate the payroll and deductions as well as the cost to print checks or have the pay direct-deposited. If the business relies on a payroll service, the cost will be based on the number of times the payroll must be done.
Finally, small business owners should consider their employees when making this decision. Typically salaried employees are paid either once per month or semi-monthly while hourly employees are often paid on a weekly or bi-weekly basis. In addition, employees might have a preference (usually to be paid more often) that employers may want to take into account if possible.
If you have questions about your own payroll operation and how frequently your employees should be paid, The Payroll Department can help you evaluate your situation and determine what is best for you. With years of experience in providing reliable payroll service, we are able to help you work these kinds of issues. Just give us a call at (317) 852-2568.
-Jessica of The Payroll Depart Blog Team
As a small business owner, you’ve probably heard that Indiana and other states are at will employment states. But do you really understand what that means you are allowed to do or not do when it comes to terminating employees? Even in this area of your payroll process, The Payroll Department can help with information you need.
Basically, at will employment means you can terminate an employee with or without cause, at any time, without adverse legal consequences. However, you cannot terminate an employee for illegal reasons. Additionally, you don’t have to provide advance notice of termination. For example, at-will employers can:
Alternatively, employees can leave a job at any time, with or without a reason, without legal recriminations, too.
However, there are state and federal exceptions to this law. You cannot terminate employment for any of the following reasons:
Additionally, you cannot terminate an employee at will if:
As a small business owner, you’re probably more knowledgeable in the actual running of your company rather than every local, state and federal law concerning employment, payroll and taxes. Therefore, to avoid errors that can lead to substantial fines and penalties, consider hiring The Payroll Department. As an experienced payroll services provider, we can handle your payroll and payroll taxes for you, so you can get back to managing your business.
-Ariane of The Payroll Department blog team
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