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What can outsourcing payroll tax management do for your new business?

Monday, May 16, 2022

As a new business owner, you’ve likely discovered there’s a lot to enjoy about running your own place, such as developing a seasonal menu with local ingredients, finding new items at market to stock your shelves or building relationships with new customers. By now, you’ve also probably found that processing payroll and ensuring tax obligations are met is not quite as fun.

It’s also no small feat to manage properly, especially as your business grows. Even if it doesn’t seem like it now, payroll will be one of your largest operating costs and one of the most tedious managerial tasks you will face. But you don’t have to face it alone. And it’s never too early to start thinking about getting help.

Enlisting the right payroll provider can benefit your process by making payroll and payroll tax management a breeze, while improving compliance and accuracy for your business.

Before we dive in, let’s cover the basics first. Even though you’ve likely run at least a few payrolls by now, read through to gain a well-rounded, working knowledge of your payroll tax responsibilities as a small businesses owner. Then, learn how the right payroll solution should save your company time and money. At the end, you’ll have answers to the following questions:

Let's get started!

What are payroll deductions?

Payroll deductions are wages withheld from an employee’s gross pay for the purpose of paying benefits, garnishments and taxes. These deductions are usually processed per pay period based on employee-supplied withholding information and any applicable tax laws.

There are two types of payroll deductions: voluntary and mandatory.

  • Voluntary payroll deductions: Deductions your employee(s) have elected, like insurance or retirement plans

  • Mandatory payroll deductions: Deductions required by law, such as wage garnishments, court-ordered child support payments, and federal and state income taxes

Voluntary payroll deductions, which are authorized in writing by an employee for specific purposes, can include:

  • 401(k), IRA or other retirement plan savings contributions

  • Pre-tax health savings account (HSA) or flexible spending account contributions

  • Life insurance premiums

  • Short-term disability insurance plans

  • Union dues

  • Payment for job-related items like uniforms or tools

Mandatory payroll deductions can include:

  • Wage garnishments ordered by the court, IRS or any regulatory agency

  • Child support

  • Taxes at the federal, state and local levels (we’ll cover these in detail in the following sections)

Hourly wages or salaries, bonuses, commissions and pensions are all eligible for a garnishment order. It’s critical to ensure that you deduct the garnished amount correctly and pay it in full; failure to do so may result in your liability for back payments.

The amount withheld from each employee varies depending on their withholding selections and obligations, like a court-mandated order to pay a portion of a paycheck directly to a creditor.

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What is a tax deduction?

Payroll deductions and tax deductions are two very different subtractions. While payroll deductions are employee-focused and can be enforced by law, tax deductions are business-focused and are considered an incentive as the result of common business expenses.

Though rules vary, sole proprietorships, S-corps and C-corps, partnerships and LLCs can claim tax deductions.

Tax deductions, which are sometimes called tax write-offs, are expenses small business owners can deduct from taxable income to help lower the amount of tax owed.

Tax deductions, which are sometimes called tax write-offs, are expenses small business owners can deduct from taxable income to help lower the amount of tax owed. Tax deductions can include:

  • Business startup costs

  • Inventory

  • Business property rent and business property utilities

  • Advertising and marketing

  • Insurance

  • Business property furniture

  • Employee salaries, benefits programs and gifts

  • Travel expenses

While tax deductions differ from payroll deductions, both are important to your business operations. Let’s take a deeper look at how payroll tax obligations influence how you run payroll.

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What are business’ payroll tax obligations?

The structure of your business, whether it’s a corporation or limited liability company, will determine what taxes you will pay and how and when you will pay them.

Figuring out your payroll taxes requires identifying taxable workers and wages, calculating the proper withholding amounts and remitting the amounts to the appropriate agencies in a timely manner. Fluctuations in employment and continuous updates to tax legislation can make payroll time-consuming and complex, and payroll mistakes can be costly if workers are misclassified or paid incorrectly or payroll taxes are paid late.

As always, it’s important to consider any tax form provisions that may affect your business, too.

Any company with employees must withhold payroll taxes from their employees’ paychecks and is responsible for paying applicable federal, state and local taxes. (If your company is incorporated but you don’t have any employees, you must pay estimated taxes on your self-employment income every quarter.)

The taxes usually withheld from employee paychecks include:

  • FICA: The Federal Insurance Contributions Act (FICA) mandates a payroll tax on the paychecks of employees to fund Social Security and Medicare programs. An equivalent law requires those who are self-employed to contribute through the Self-Employed Contributions Act (SECA).

  • Federal: Most businesses must file and pay federal taxes on any earned or received income throughout the year. (Partnerships are the only exception, as they file an annual information return instead.) Federal tax payments are done semi-monthly, monthly or quarterly. Federal tax requirements vary by state; this resource can help you determine what your business is responsible for.

  • State: State taxes depend on your business structure. Sole proprietors report their personal and business income taxes on the same form while corporations are taxed separately from the owners.

  • Local: This tax is an assessment by a state, county or municipality to fund public services like education, sewer maintenance and garbage collection.

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Do withholding obligations vary by location?

Other withholding obligations include Federal Unemployment Tax Act (FUTA) and, for select states like California, New York and New Jersey, disability insurance taxes. At the state level, businesses in all states pay workers’ compensation insurance and unemployment insurance taxes.

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What can a payroll solution do for my small business?

Outsourcing your payroll to experts immediately saves you time, allowing you to focus on growing your new business rather than crunching numbers and sifting through tax law changes. There are thousands of payroll processing companies on the market to choose from, and the option that’s best for your business depends on your budget, company size and administrative needs. Ideally, a payroll processor will offer superior technology and secure data, affordability, customization and a fully-dedicated customer service representative.

In addition to simplifying payroll and payroll tax management, the right software solution should help you:

  • Find and hire the right applicants

  • Automate employee onboarding

  • Create smarter schedules

  • Manage finances and ensure tax compliance

  • Make data-driven decisions

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What features should I consider in a payroll processing software?

When researching payroll processing software, look for features that simplify and expedite your payroll routine. Ideally, you want a payroll processing and tax management solution that lets you easily:

  • Pay employees with direct deposit, live checks or Paycards

  • Calculate gross-to-net for all employees

  • View reports with date-range and other customized reporting options

  • Report taxes and make payments at the federal, state and local level

  • Maintain compliance across various reporting requirements including child support or wage garnishment

  • Provide employees easy access to digital paystubs, W-2 and 1099 forms, direct deposit data and more

Consider the difference it would make to run your small business with a secure, dedicated payroll service with an efficient implementation process and robust features like:

  • Payroll tax management: Designed to keep your business compliant, a payroll tax management dashboard lets you easily view all withholdings for the year, including Social Security, health benefits, workers’ compensation and unemployment.

  • Payroll and HR: Having on-demand access to HR professionals, personalized alerts about legal and regulatory changes and customizable documents for hiring, management and payroll keeps your hiring process and employee management standards professional and streamlined.

  • Pre-employment solutions: Filling an open position can be a time-consuming, tedious task. When you work with a payroll provider with an integrated hiring platform, you can post jobs, collect applications, schedule and conduct interviews, monitor candidates and onboard new hires.

  • Time and attendance: Creating and balancing scheduling can be a handful. Look for a payroll provider that lets you track employee hours through manual punches, badges or biometric technologies as well as build schedules and create reports for labor, overtime, exceptions and absences.

  • Benefits administration: Being able to add new hires, update employee info, sync benefit-related payroll deductions and prevent manually-keyed errors will really benefit your business by saving you time and providing organization galore.

  • Integrated solutions: From workers’ compensation to 401(k), a payroll provider that works with accounting platforms like QuickBooks to check off all the boxes that keep things running smoothly today and in the future lets you cover your needs now and later.

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How do you choose the right small business payroll service?

When looking at payroll service providers, consider:

  • Available must-have payroll features

  • Ease of use

  • Company budget and cost of service

  • Integration options

  • Supplementary add-on services

  • Accessible customer support

Before hiring a payroll service provider, you should also ask how the company protects data, how it handles company growth and how often its tax tables are updated for compliance.

Ultimately, you want a payroll processor that is affordable, reputable and dedicated to your small business.

A secure, intuitive payroll processor can be a game-changer for your business. If you feel frazzled by tax season and subsequent tax deadlines throughout the year, continue reading to see how implementing a powerful solution like Heartland Payroll+ can really pay off.

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What can Heartland Payroll+ do for my small business?

You’ve got recipes to test, garments to steam, inventory to log and connections to make. Hand the dull, time-consuming stuff off to someone else, like Heartland. (After all, we don’t think there’s anything boring about payroll.) In fact, your dedicated specialist will be happy to help you work through it. With us, you can rely on a single point of contact who knows your name and is just an email or call away when you need a helping hand to run a report or fix a problem.

In addition to making it easy to accurately manage and submit payroll and payroll taxes on time, our hire-to-retire people management tools provide a full range of advantages that also help you:

  • Find and hire the best applicants

  • Automate employee onboarding

  • Create smarter schedules

  • Manage finances and compliance

  • Make data-driven decisions

  • Answer questions with assistance from a dedicated Heartland representative

Plus, our web-based workforce management solution is completely customizable so you have what you need even as you grow.

Our priority is to make payroll tax management a breeze for your small business, but nothing is more important to us than the security of your data. Superior technology and a built-in electronic filing system ensure your small business is protected throughout our entire platform.

We do all our staff payroll through Heartland: taxes, W-2's, etc. It is fantastic that they have taken this off of my plate and that they do such a great job.
- Libby W.

Imagine how your business and daily to-do list could benefit when you outsource your payroll needs so you can focus on growing your new business. Your employees will be grateful to be paid reliably — and with perfect accuracy, too — and you’ll be relieved when there’s less on your plate at tax time.

We’re here for you when you’re ready to chat!