The W2’s are coming, the W2’s are coming!
That’s right, another tax season is upon us. For many, we welcome the refund and financial relief this brings, but for those poor souls working in finance, well, the hard work and long hours make for a nightmarish season. Small businesses are grateful this season for experienced accountants taking the reins. However, even with a CPA on staff, business owners should know how taxes work, and what is happening with their money.
You see, tax laws differ by state, they are also constantly changing. Business owners and payroll managers need to stay up to date on these changes, and the differences between state’s laws, especially if a company has multiple offices. Constant training on updates is always a good idea to make sure you are keeping in good practice with the laws.
Another common thing is that small businesses often combine payroll and HR into a single department. These employees need to know both payroll and OSHA laws. That is a lot of responsibility to put onto one department! Not to worry though, TrainUp can help with our Payroll law, and OSHA courses. (There are helpful links at the bottom of this article for those).
I recently interviewed some members of our accounting department here at the TrainUp corporate office, and they provided some great advice for new payroll professionals:
What advice would you give small business Payroll departments this tax season?
The taxes that are typically withheld from an employee’s paychecks are FICA, which is the Federal Insurance Contributions Act, these are your social security and Medicare deductions. Then there’s federal, state, and local income tax, and you must know which of those apply. As long as you stay on top of the current percentages for FICA, that is half of the battle. Then there’s income taxes, based on each employee’s earnings, those are also percentages that you need to ensure are correct on each employees paychecks and W2. Processing expenses and keeping up with your companies charitable donations may also be something you need to do, but as long as you stay organized and stick to your processes, this task can be easy.
What are ways to make this process easier, less work on a payroll admin?
Use the right software for your company. For example, QuickBooks Payroll is commonly used in small payroll departments, but you can also do manual payroll on regular QuickBooks. QuickBooks has several versions for different counties, with different currencies, laws, etc. There are also various forms offered for this software, like desktop, online, pro, etc.… Choosing the right version of any software is important to avoid misclassifying your tax deductions, which can make a substantial impact. Software may be one thing that you sink more money into as an important business purchase. It is worth investing in something good here, to be sure it can do everything that you need, and correctly. Also, make sure that you and your employees are trained well in how to use the software, to get the most our of it’s features.
(There is an excellent how-to guide from Intuitive Accountant that explains how to turn on manual Payroll in QuickBooks).
It is also important to put employee expenses into different categories — for example, meal receipts submitted from an employee as an expense while on a business trip need to be categorized differently from meals used to entertain your company’s clients in dinner meetings, according to the law.
Basically, have a well thought out process and stick to it, document all business deductions as they happen, and your life will be much easier.
What are good practices to keep things clean and avoid tax audits?
Keeping accurate books is essential, it will get more convoluted as time goes on, so start doing this early and keep up with it! look at your books monthly, and be certain that all expenses, donations, and payroll is entered properly as you go.
So there you have it! Some key pieces of financial wisdom to guide you through this season. However labor intensive, and tedious this season can be for the brave souls on the front lines of their payroll department, there is light at the end of the tunnel. The IRS leaves no stone unturned, and neither does TrainUp.com when it comes to helping you find the right training to survive the season. Click here to browse our Payroll classes today! Need to learn OSHA too? Click here for our OSHA classes!