my wife and i work at our shop 6 das a week we want to hire a helper.
1 employee
how do we go about withholding taxes is it worth it to go to a payroll service because we dont know a thing about it
also lets say he makes 8.00 an hour,
we send in some of his pay, do we also pay things like workmans comp and social sec?
on an 8.00 an hour employee what is the true cost per hour?
can I just with hold the taxes and send in with a 1099?
thanks
very new water for us
your accountant should be able to help you with all of this…
If you want to avoid an accountant, then there is a whole lot of reading you will need to do on the IRS website as well as Federal and State Departments of Labor. All that information is available for new businesses in the form of publications, webpages, and FAQ.
It is a lot to learn, and we did learn it ourselves. We did all of our own payroll and taxes and such the frst three years. It is now worth the cost to have a local accountant handle it for us. We have 5 employees working part time for us.
Your true cost per hour would be about $8.72. Payroll taxes and worker’s comp usually come to about 9%. Social Security is 6.2%, Medicare is 1.45%. Worker’s comp will make up the rest. That’s what you need to pay as an employer.
You are then responsible for withholding the same amount of SS and Medicare for the employee, as well as Federal, State and any Local income tax.
Not sure if I understand the question about the 1099. Somebody receiving a 1099 will not have anything withheld for payroll taxes. You may backup withhold for income tax, but the government wants their payroll taxes. So no, you can’t use a 1099 for a statutory employee.
With one employee, you may not find a payroll service that will handle your company. Once you get it down, it should be pretty easy to do it yourself though. You have a couple of filings to make, and you need to deposit your payroll taxes and tax withholding after every payday.
We use Paychex, but we are around 20 employees right now. Doing payroll for 20 employees would be a big job. For one employee, I think you can probably handle it and save some money.
what is paychecx charging you?
I just checked Costco’s payroll service for you – They would charge you about $30 per pay period to handle payroll for one person.
What are you and your wife doing about payroll taxes for yourselves? Paying yourselves a regular paycheck will dramatically simplify your lives when tax time rolls around. That way your income tax can be withheld from your payroll check, eliminating the need to pay quarterly tax payments for yourself or worry about the lump-sum payment at tax time.
You can use a payroll service, or you can pay your accountant for a few hours work to teach you how to do the payroll yourself. Do not just let this go thinking you’ll figure it out later – I know one person who lost their business because of payroll tax problems, and another who almost did. It’s hard enough to make a business successful. You don’t need the added drama of a run-in with the IRS or some other friendly government agency.
Another option - get (or upgrade) Quickbooks - and then use the built-in payroll function. I think it will calculate and document all the withholding for you - and generate files to give an accountant, and maybe even reports for IRS, etc.
Cheaper than a monthly fee or an accountant doing it for you - you write the check, but the software tracks it all.
I use a payroll service, but it’s for more employees. With just a couple, I’d probably do it myself like I’m suggesting.
I pay $6.70 per employee per pay period, plus a $7.75 delivery fee to have the checks sent via messenger on pay day.
I was with ADP for a while. They were about 30% more expensive, plus they refused to draft the paychecks off of my business account. So they pulled the entire payroll amount out the day before pay day and they got to hold the money over the weekend. The checks were drawn off of their account. I know ADP will do this (from other companies), but they just refused to do it for us.
Paychex only pulls out the taxes the day before. The actual checks are drawn off of my account and have my signature printed on them. I make the checks available to employees at 2:00pm on payday (Friday). That means it’s impossible for any of the checks to clear the bank that day. They’ll clear on Monday at the earliest, and that’s a big cash flow helper. You’ll have employees that don’t cash their checks for a week or more.
MM - Quickbooks payroll service is not included with the software, but it is pretty cheap. It looks like you can do their basic plan for 1-3 employees for about $9.00/month. It says it “provides data to prepare tax forms manually.” If you want them to make deposits and file for you, it says it starts at $59.00/month. That’s still not too bad.
The only downfall over a payroll service is that you still have to manually cut and sign the checks. If you’re the kind of business owner that might like to take a vacation now and then you need to get somebody else signature authority on your bank account.