Setting Up a Payroll System for Your Michigan Business

“Whether you have one employee or 50, setting up a payroll system not only streamlines your ability to stay on top of your legal and regulatory responsibilities as an employer, but it can also save you time and help protect you from incurring costly Internal Revenue Service (IRS) penalties.”

This is how the U.S. Small Business Administration (SBA) summarizes payroll. This is the government agency whose slogan is to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” So when they warn against legal responsibilities and IRS penalties, we’d better listen.

Employer Identification Number

First of all, you should get an Employer Identification Number (EIN) from the IRS. This can be done online. You can also take advantage of the Michigan Business One Stop online service to register online for Michigan taxes, Unemployment Insurance, and other permits that may apply to your specific type of business.

Classifying Employees

In hiring workers, a common problem of human resources departments and business owners is whether to classify them as employees or independent contractors. You are required to withhold taxes from your employees’ paychecks (more on this later). With contractors, however, you simply pay them the amount agreed and they are responsible for paying their own taxes. Improperly classifying an employee as a contractor and failing to withhold and pay their taxes will make you, the employer, liable for back taxes and penalties.

However, the distinction is often vague. Even the IRS admits that “there is no ‘magic’ or set number of factors that ‘makes’ the worker an employee or an independent contractor, and no one factor stands alone in making this determination.” Generally, the employer must take a look at the business relationship with each worker and determine the degree of control of the employer on the worker’s job, and conversely, the degree of independence the worker has in carrying out the job. Things to consider are how much control you have on how the worker does his or her job, whether you provide a regular salary and tools/supplies etc., and the type and length of contract, benefits provided, and the importance of the work as an aspect of the business.

Payment Schedule
So along with prescribed exercises wholesale viagra from canada and nutritious foods you should follow the prescription to avail maximum benefits. Taken an hour before sexual activity, these medications work on sexual arousal, and considered safe for use. other buy generic viagra The reason could be the impediment cialis discount pharmacy in blood circulation. discount soft cialis Apart from this, there are a lot of American ginseng benefits for menare enormous.
 

Another decision to be made beforehand is how often your employees will be paid. State laws vary, but in Michigan, this can be once a month, twice a month, every two weeks, every week, or more frequently. There are also time limits as to how long after the work is done you are required to pay the salary. Aside from the pay period, have clear systems set in place for tracking hours or days worked, paid time off, overtime pay, and deductions for health plan premiums, retirement funds, and taxes.

Find Out All Taxes That Need To Be Filed

The taxes, in particular, need precise accounting and attention to detail. As the employer, you are responsible for filing and submitting both employees’ income tax and payroll taxes. These usually include Social Security, Medicare, federal income tax, state taxes and insurance payments. You will also have to submit your own Social Security contribution and federal unemployment tax for each employee.

For bona fide employees, they must fill out the Federal Income Tax Withholding Form (W-4) and submit this to you upon employment. You will use these forms to determine, withhold, and pay the corresponding federal income tax for each employee. Employers are also required to keep complete records of each employee for at least three years after the employee leaves. These records should contain the name, address, birth date, job title, basic rate, hours worked (unless employed in executive, administrative or professional capacity), total wages paid each period, and itemized deduction and fringe benefits.

Get Help If Needed

Setting up and running a payroll system properly is one of the most important financial aspects of your business. The system should ensure that employees are paid fair wages for their work, which is mandated by law and keeps your workforce happy and productive. As you can see, however, setting up payroll can be quite complex and tedious, and any small mistake could result in hefty fines and penalties. There are many tools available, such as paycheck calculators and programs, that you can use to make things easier. However, if you’re like most business owners, you already have too much on your plate. Getting an experienced CPA to handle everything is your best option. Khaled Hazzouri has over 15 years’ experience helping businesses in Michigan with all their accounting and payroll needs. Contact us today at 734-844-1614 or fill out our contact form to set up an appointment.

We can also be reached through our social media accounts:  Facebook fan page / Twitter Feed / Google+ Account