Is direct deposit a good way to pay employees?

Direct deposit is one type of payment you can offer employees. It is used by 82% of workers, making it the most popular payment method. It’s convenient for both business owners and employees. There’s no lost checks and since there are no physical checks it’s a pretty safe payment option. Many business owners like direct deposit because it is convenient. You can pay employees without having to hand them a physical check, which also makes it a safe payment option. You don’t need to worry about employees losing paychecks with sensitive business information either. an employee quits, then the last check must be given on the next scheduled payday.

What is the difference between an exempt and non-exempt employee?

Unless an employee is exempt, you must pay them overtime wages. Exempt employees must meet three requirements to be considered exempt:

1. The employee must make at least $35,568 per year/$684 per week.
2. The employee must be paid on a salary basis.
3. The employee must have job duties that are considered exempt (e.g., executive, administrative, or professional).

If the employee does not meet the above requirements, they are non-exempt. In that case, you must pay them at least the federal minimum wage as well as overtime wages.

How long do I need to keep payroll records?

Hanging onto records is also part of being a small business employer. According to the Department of Labor, you need to keep all payroll records for at least three years.. And, you must keep all records of employment taxes for at least four years after filing the fourth quarter of the year, according to the IRS.

Cash is low right now, can I put off paying my payroll taxes?

Payroll  tax penalties can be severe. There really aren't too many opportunities for reducing your exposure to payroll taxes. If you hire employees and pay them any kind of compensation, it's a given that you're going to have some payroll tax liabilities. It is unwise to try and avoid employment tax liability by classifying your workers as independent contractors. The IRS, the Department of Labor and their state counterparts are aggressively targeting employers to uncover misclassification, and the penalties are severe.

Perhaps your biggest opportunity for realizing any kind of real savings is to make sure you tend to each of your obligations and avoid getting hit with penalties. Many of the potential payroll tax penalties are the same ones you'll find when you're dealing with other types of taxes. For example, there are both criminal and civil penalties for failing to timely file payroll tax returns or to timely deposit taxes you owe.

There are, however, a couple of penalties of which you should be particularly mindful as you deal with your payroll tax obligations:

• 100 percent penalty. The biggest risk you face in administering your payroll tax obligations is that you can be held personally liable for all income and FICA taxes that you willfully either fail to withhold from your employees' wages or fail to pay to the IRS and your state tax agencies.
• Even if you avoid the 100-percent penalty because your conduct wasn't "willful," you could face smaller penalties if your failure to withhold was due to your misclassification of an employee as an independent contractor. In the context of tax penalties, willfulness requires that the individual's conduct be intentional, knowing, and voluntary.
• In some cases, a reckless disregard of obvious facts will suffice to show willfulness.

What are employment taxes?

Employment taxes are federal and state taxes related to employee's taxable compensation. They include:

• Income tax withholding based on information provided by employees on Form W-4. This tax is paid exclusively by employees.
• FICA. This is comprised of Social Security and Medicare taxes and is paid equally by employers and employees. The Social Security portion is referred to as Old Age, Survivors, and Disability Insurance, or OASDI and provides benefits to retirees, spouses and former spouses, as well as dependent children in some cases, and disabled individuals under retirement age. The Medicare portion allows those age 65 and older (plus certain other individuals) to qualify for Part A Medicare coverage with no additional cost, plus coverage through Parts B, C, and D for an additional premium.
• FUTA, which is federal unemployment tax paid exclusively by employers.
• State unemployment tax is paid by employers, although a few states require some employee contributions.

How Soon Do You Have to Pay an Employee Their Last Paycheck?

The window of time an employer has to deliver a former employee’s last paycheck is contingent on their state’s laws. Some states have final paycheck laws, while others do not. Some states appoint different time frames depending on whether the employee has quit voluntarily, or was fired.

While no federal law requires employers to give former employees their last paycheck immediately, the Department of Labor (DOL) urges employees to contact the Wage and Hour Division or state labor department if the regular payday for their last working pay period has passed and the employee has not been paid.

In Colorado, for example, if the employee is fired then the last check must be given immediately. “Immediately” means within 6 hours of the start of the next working day if the payroll unit is closed when termination occurs, or within 24 hours if the payroll unit is offsite. If an employee quits, then the last check must be given on the next scheduled payday.

What forms do new employees need to fill out?

The government requires some new hire forms. Others are necessary documents you need for your business. 

• Take a look at the federal employment eligibility form employees must fill out:
• Form I-9
• Employees also need to fill out income tax forms so you can accurately run payroll:
• Form W-4
• State W-4 form (if available)
• And, here is a list of potential business forms you might require new hires to fill out:
• Emergency contact form
• Employee handbook acknowledgment form
• Bank account information form 
• Benefits forms