Easy Payroll for Small Businesses: How to Get Started
Getting started with payroll can be overwhelming, especially if you’ve never done it before and you have a small business to run. But it doesn’t have to be hard or stressful! These three easy tips will help simplify the process and make sure your payroll runs smoothly every time you pay your employees their salaries.
What is an S.E.P?
S.E.P stands for Simplified Employee Pension (S.E.P.) It is a simplified pension plan that may be offered by an employer and it offers the same benefits as a traditional 401(k). Under S.E.P., the employee’s contribution is limited to 10% of their pay, while the employer must make contributions equal to 2% of the employee’s pay, not exceeding $10,000 per year or 25% of compensation, whichever is less. For more information on S.E.P, visit our blog post about easy payroll for small business
Why Do I Need an S.E.P?
A SEP is a type of retirement plan that you can set up on your own without the help of a professional. It’s important that you have an S.E.P., because it allows you to save money for retirement and take advantage of tax breaks at the same time. A SEP is easy to set up, and if you start now, you could be saving money in no time. Here are three steps to get started with your own easy payroll for small businesses.
Do I Need Employees to have an S.E.P?
Many people believe that you need employees in order to have a SEP. But this isn’t true! A SEP is an individual retirement account, not a retirement plan for your employees. You can use it as your own retirement account and you don’t need anyone else’s permission or involvement. It offers the same features of other types of IRAs – tax deductions on contributions, tax-deferred earnings and the ability to withdraw funds without penalty after age 59 1⁄2 years old. The only difference between a SEP IRA and other IRAs is that the contributions are much smaller because they’re made by just one person – you!
What Else do I Need to Know about an S.E.P.?
Setting up an S.E.P. is a simple process, but there are some guidelines you should follow when choosing your tax withholding method. First and foremost, you will need an employer identification number (EIN). You can apply for an EIN through the IRS website. Next, decide how often you would like to deposit taxes withheld on behalf of your employees into the appropriate federal or state account by checking one of two boxes at the bottom of Form W-4SEP.
If you do not wish to deposit taxes into any account, choose none from the list. If you want to deposit quarterly instead of monthly, change this information on line 1 of Form W-4SEP.
Start Now and Stay Compliant
The first step in getting easy payroll up and running is figuring out which type of plan you need. The IRS has a two-step test:
(1) will the business be a one-person business or have more than one person?
(2) does your state require workers’ compensation insurance? If the answer to both is yes, then you need an employee leasing company. But if the answer to either question is no, then you can set up an individual self-employed retirement account like SEP IRA or Simplified Employee Pension (SEP).
For those without employees and without employees in another jurisdiction, it’s possible to use a sole proprietorship. It might not be as advantageous as other plans because there are many restrictions on what can go into it but it’s also quite simple.
Where Should I go From Here?
If you’re a small business owner, it’s important that you know how to handle your payroll efficiently. To get started with easy payroll for small business, here are a few resources to check out.
1) The IRS has an online guide about how to set up and manage your payroll process through their website.
2) There is a free mobile app called Gusto that can help you get started with easy payroll for small businesses by calculating taxes and giving you all the forms necessary to complete.
3) You should also make sure you have the proper insurance in place to protect both yourself and your employees. You might want to consider putting together a health plan so your employees will be protected if they need time off of work for an illness or injury.
4) Finally, if you own multiple properties, you should also have liability insurance in case there is an accident at one of them.