Payroll can be a small business owner’s nightmare: You finally made it to a point in your business where you can hire some regular help. You look at IRS Publication 15 and realize there is so much to know. Overtime, minimum wage compliance, FICA, withholding, W4 forms, tip pools, tax deposits through EFTPS, unemployment. The payroll nightmare sets in as you realize you have to also deal with your STATE’s unemployment, overtime, and minimum wage laws, along with their tax deposit rules, mandatory breaks, and child labor rules. Did I mention the mandatory workers’ compensation insurance?
The anxiety builds in your chest as you realize there are completely different sets of rules for OSHA, family and military leave, identity verification, and labor posters. Health insurance? 401k? Vacation? The compliance letters threatening fines keep coming in the mail. Lawyers are circling in your parking lot.
Desperate Measures to Break Free
You try to get away from it all. “I just won’t hire anyone.” Great solution. You are the hero of your dream for a few minutes. Then angry customers start banging on your door because you can’t keep up. They start writing bad reviews and telling their friends. Your help shows up, ready to work, and you have another idea. I’ll just pay everyone cash! ‘Under the table!’ You are all contractors! You are back to being the hero of your dream again. For a minute.
Then the biggest, scariest monster of all shows up (the IRS) and tells you that payroll is not optional and you have to comply with all these laws you don’t even know about. They bill you for all the taxes you should have paid before, plus fines, penalties, and interest on top of that. Then the big scary IRS monster tells all the other monsters what you did and they come after you too. State and federal monsters are everywhere and they are going to take your business.
Suddenly you wake up. Whew! But then you realize it wasn’t a dream at all. This is real. This is business. The payroll nightmare comes for every small business.
Why is Payroll such a Nightmare?
About 100 years ago, my grandmother had to drop out of school and go to work at a hosiery mill making stockings to help support her family. She was 12. My grandfather had to drop out and he became a plumber’s apprentice. He was also 12. No overtime. No Saturdays off. OSHA was not there protecting their safety. Workers fought hard in the 1920s and 30s to get the labor laws passed that we have today. Compliance with labor laws is taken very seriously by the state and federal governments.
When you are in business you are held to a higher standard. Ignorance is not an excuse for non-compliance. You need to know what you don’t know.
Escape the Nightmare
When you decide that it is time you need help, do not attempt payroll on your own. I always say, “Do what you do best and get help with the rest.” You don’t see me trying to put up sheetrock or make macarons or raise cattle. I don’t expect you to try to do my job. Get help with payroll. It is complicated.
You can:
- Hire a payroll professional. (Like me!) They will handle everything you need for payroll and advise you on any sticky points like workers’ comp, labor posters, etc. They will have you sign and IRS Form 8655 that authorizes them to sign, file, and submit tax deposits on your behalf.
- Use an online service. This could be full service, where they submit all your forms and make the payments for you, or it could be modified service where they may not do everything.
Either way, at the end of each pay period, you send your payroll professional the employees’ information, including their hours worked, and they send you complete paystubs for your employees with the proper withholding calculations.
It Is Still Your Nightmare
Before signing up for an online service, see how they handle exceptions (if you submitted incorrect information or hours or if you miss a deadline). Ask how they handle letters from the IRS or state. (They happen a lot). Waiting on hold for hours to get non-answers makes that nightmare come back.
Remember that it is 100% you that is responsible for payroll. Your payroll professional is not the one responsible for making sure the information is correct. They have no way of knowing who actually worked what hours or if they employees were ever paid. They are relying on your information to be correct.
Choose a payroll service that has experience and that will answer you when there is a problem.
Grass Roots Taxes: providing nightmare-free payroll for small businesses since 2009. Email or text today if you are ready to get started.