If you’re reading this, congratulations! You are now ready to hire your first employee! Setting up payroll for your PDR business is a big deal. You’ve successfully hired employees and provided work for them. But how do you go from a world of Paintless Dent Repair to learning terms such as “EIN” and so many different taxes? Here are a few, easy steps for setting up payroll that saves you time and protects you from the IRS.
- Get an EIN: EIN is short for “Employer Identification Number.” Simply put, EINs can also be known as an “Employer Tax ID.” An EIN will be used for reporting taxes and helps you avoid identity theft.
- Get local or state business ID: Depending on where you’re located, you may be required to have an additional tax ID number. You can check to see if your state requires this business ID by clicking here.
- Team Information: As an employer running a business, you’ll be the one responsible for filing taxes and reports for your team. Below is the information and forms you’ll need for each employee you bring onto your team:
- *Full name
- *Start of Employment date (and termination date, when and if this occurs)
- *Date of birth
- *Tax filing number (SSN or EIN)
- *Form I-9: verifies an employee’s eligibility for employment in the U.S
- *Form W-4 for employees
- *Compensation details: by having in writing compensation details, you prevent any potential disagreements that may arise
4. Employee Classification: Although you may know who are your part-time employees and who are your full-time employees, the difference between the two actually impacts their tax withholdings and how much you owe them. In legal terminology, these types of employees are also known as, “independent contractors” and “employees.” For more information on the difference between these two, check out this link.
5. Determine Pay Period: For anyone in the workforce, payday is a celebratory day. Determine how often payday happens and make sure it aligns with your own schedule so it doesn’t create a problem for your business, like preventing the cash flow. In addition, check to see what your employees need because more often than not, payday determines when they pay their bills, plan family vacations, etc. It’s also important to keep in mind that your state may have constraints about how/when you run payroll. Check this list to see what the requirements are for your state.
6. Payroll System: There are so many different payroll systems out there, but how do you know which one is for you? fundera.com has a comprehensive list of over 50 payroll services specifically for small businesses. Luckily, technologies such as ReconPro are specifically designed PDR business owners as it allows you to streamline back-office operations like payroll, and can help keep you compliant with labor requirements for your situation.
7. Time to Start: Once you have all this together, you’ll be able to start. Just keep in mind that cutting paychecks isn’t the only thing you’ll have to do. You need to stay on track to make sure no employee is ever under or overpaid (it has happened), you file payroll taxes on time, and keep a clean record.
If you follow these steps, you will be good to go! It may seem like a ton of work, but the fact that you’re already seeking how to set up payroll for your business is proof that you’re setting up your business to be successful. And in the world of PDR, which will always be in demand, a well-run business will never be short of income. Just make sure you do everything right, especially payroll, and success will continue.