|
|
Payroll laws: Feature Article
When it comes to payroll laws the main laws that concern most people are the laws that apply to payroll taxes. In fact understanding payroll taxes as a small business owner is actually crucial in running a small business. With payroll one thing that you need to remember is that if you make any mistakes when it comes to your payroll taxes it is going to end up costing you a lot of money because of the fines that are involved in payroll tax mistakes. So in order to avoid these costly mistakes you are going to want to learn all about your payroll program by getting to know your software program or by spending some quality time with your accountant. In doing this what you are going to be doing is learning about the various payroll laws so that you can avoid getting a visit from the IRS.
Here is a look at the payroll laws that you are going to need to know if you are running a small or medium sized business and are doing your own payroll.
Number one:
Payroll taxes are due on either semi-weekly or monthly. When they are due is actually going to depend on the size of your payroll. But this due date is not something that you are going to get to determine it is actually something that is determined by the IRS. When you are paying payroll taxes the taxes that you are going to be responsible for are federal income tax, unemployment tax, Medicare, and Social Security on the federal level. The taxes that you are responsible for on the state level will depend on what state you live in and what their requirements are.
|
|
With Social Security and Medicare taxes, which are also called FICA, are withheld from employees' paychecks and the federal government relies on these taxes to generate retirement savings. But as an employer you are required to match the taxes that are withheld from your employees' paychecks. The amount that is supposed to be paid by each employee is determined by the IRS, to figure out this amount you will need to refer to IRS Publication 15.
Helpful Resources: 1. Payroll laws, regulations, analysis, news, and tools This website provides you with a variety of information that you can use to determine the various payroll laws that apply to your state, but they also include national payroll laws that apply to all businesses. 2. Payroll tax law made simple 3. Article Insider - Payroll Laws 5. Payroll tax and immigration laws for domestic service employees 6. Federal Tax Law 8. Information on the federal payroll tax, federal tax withholding 9. Payroll 10. Payroll Basics - What you need to know |
Federal income taxes that are withheld from your employees' paychecks are filed in accordance with the W-4 Employee's Withholding Allowance Certificate. This form is actually completed by each employee prior to employment, it is also a good idea to ensure that each employee updates their W-4 each year that they are employed with you or when their lifestyle changes and adjustments need to be made. But to determine the amount of federal taxes that are withheld from each employee you are going to need to use the W-4 in combination with IRS Publication 15.
Unlike the other taxes unemployment taxes are not withheld from an employees' paycheck. They are actually something that is paid directly by your business. How you determine the unemployment taxes is going to depend on the state that you live in. But for the most part it is a rate that is a percentage based on the total number of employees that you have and the total number of former employees that you had that are currently collecting unemployment benefits at any given time.
Number two:
You are going to need to make sure that you keep records of all of your payroll information. In fact federal law requires that you keep payroll records for at least three years. But some businesses actually keep their records longer than that and because of today's technology keeping payroll records longer is easier because you can store it all on a computer disk rather than in boxes of paper.
Number three:
If you plan on deducting anything from an employee's paycheck besides payroll taxes than you are going to need to get the employees permission to have that amount deducted. In addition to their permission you are going to want to include the amount that is to be deducted when it will be deducted, how often it will deducted and anything else that is relevant to money being withdrawn from their check. This can be for health insurance purposes, purchases made by the employee, etc. What this does not cover is wage garnishments. If you receive a letter from the government stating that you need to deduct money for child support or back taxes then you do not need the employee's permission because the government will take responsibility for notifying the employee.
Number four:
If you are hiring employees you need to be aware of the minimum wage and realize that you can not pay your employees anything less than minimum wage. If you happen to live in a state that also has a minimum wage then the employees that you are hiring are actually entitled to the higher wage, whether it is state or federal. But the minimum wage is actually different for tipped employees. The minimum wage for tipped employees is lower than nonexempt employees as long as that amount plus the tips received equals at least the federal minimum wage, the employee gets to keep all of the tips and the employee usually receives more than $30 in tips each month on a regular basis. If these are not meet then you are responsible for making up the difference.
Number five:
If you are hiring people under the age of 20 there is a special minimum wage that applies to them, which is less than the federal minimum wage. But this special minimum wage can only be paid to people under the age of 20 for the first 90 consecutive days of employment with an employer. Once that time is up they must be raised to the federal minimum wage. But there are also other programs that allow you to pay less than the full federal minimum wage that apply to people with disabilities, full-time students, and student-learners employed pursuant to sub-minimum wage certificates.
Number six:
If you have covered, nonexempt employees than you are required to pay them overtime at a rate that is not less than one and one-half times an employee's regular rate of pay. This amount must be paid to those employees after they have worked 40 hours in a workweek. But there are some exceptions to the 40 hour work week standard, such as police officers and firefighters that are employed by public agencies and to employees of hospitals and nursing homes. If the state that you are incorporated in has enacted overtime laws then you need to know that the employee is subjected to the overtime that has the higher standard, basically the one that gives the employee more money. There is no federal law that requires you as an employer to pay double time. That is something that you can do if you wish as an incentive to get people to work holidays or other days off.
Number seven:
Exempt employees are exempt from the protections of the wage and hour laws of their state or by the federal government. These employees must be paid on a salary basis and are not subject to reduction based on the quality or quantity of work performed. Where as nonexempt employees are protected by the wage and hour laws of the state and the federal government. These laws require that you pay the employees at least a certain hourly wage and a premium rate for overtime work. So be sure to classify your workers appropriately for payroll purposes to avoid problems with payroll.
Number eight:
You need to determine if your workers are considered employees or individual contractors. This is an important distinction because it affects payroll taxes; also it can draw the attention of the IRS to your business which can result in an audit if you are not using the distinction appropriately. In the broad sense a worker is an employee when the employer can direct what AND how the work will be performed. Whereas an independent contractor is when the employer can direct what work will be performed but not how the work will be performed. In order to determine the difference the IRS generally applies a common-law test that will determine where the worker falls, so be sure to look at how it is determined before you start doing payroll.
Number nine:
If you are using temporary employees you need to be aware of the fact that these employees are under a contract with a temporary employment agency so they are not your employees. What this means is that they are considered employees of the temporary agency which means that all income tax withholding and payroll obligations are the responsibility of the temporary agency. But if the temporary agency ceases operations without sending in their employees' payroll tax obligations then these obligations become the responsibility of the company that used the temporary workers. The same thing applies if you used leased workers, which a leased worker is an employee of a professional employer organization (PEO).
Privacy Policy, Terms of Use