Deciding to hire employees and having a payroll is a big decision for small businesses. This can add new complexities to a business’s accounting system because the business will not only have to pay the employees, but the business has to pay federal employer taxes and state unemployment taxes. Due to this additional complexity, it helps to go through an accounting firm that offers payroll services.
Payroll includes the following elements. There are wages, which is the gross amount (amount before any withholding for income taxes or payroll taxes). Federal income tax withholdings are another component of payroll where the employer takes part of the employees pay and sets it aside for the income tax bill. There are also employment taxes, usually, this is referred to as FICA taxes. FICA taxes are made up of Social Security taxes and Medicare taxes. Employees and employers pay 6.2% and 1.45% for these amounts.
Each company that has employees and payroll must also pay unemployment taxes. These taxes go toward the unemployment programs federally and at the state level. Federal unemployment taxes (FUTA) are based on the first $7,000 of each employee pay. State unemployment taxes (SUTA) that a company must pay differ in amount from state to state but are another form of payroll taxes.
Accounting for these amounts creates additional liabilities for a company and making sure the liabilities get paid is important for reporting purposes. Having an accountant take care of this for you has multiple benefits. The first is that they can help make sure that the bookkeeping of these amounts is correct. The second is that they can help with filling out payroll forms.
Every quarter a company must fill out form 941 and form 940 each year. These payroll forms can be confusing for small business owners who are not well versed in accounting or payroll. If these forms are filled out incorrectly or if they are late, there are penalties, interest, and late fees that can be charged. Most business owners would also agree that having to deal with the federal government over taxes is not a fun endeavor and can be distracting from to the business owner’s ability to focus on the operation of their business.
Overall the largest benefits of using an accountant for payroll is peace of mind. It will allow for small business owners to outsource a part of their business that they may not be experts in while making sure that all federal, state and employee needs are met. If you are using an accountant for bookkeeping services or tax preparation, it would be very beneficial for the business to ask their accountant if they offer payroll services. This will decrease the number of people that are working in your accounting system which can improve accuracy, and help save business owners money.