5 Things You Should Know About Employment Taxes As A Startup

11 Jul 5 Things You Should Know About Employment Taxes As A Startup

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Business Tips

by Becky Brown  •  0 Comments

5-things-you-should-know-about-employment-taxes-as-a-startup.jpgThe early days of a startup business are exciting, but can also be somewhat grueling. There’s nothing quite like taking your idea to the marketplace, and actually watching it take off. But you’re undoubtedly overwhelmed with responsibility, working long, hard hours, and doing it all by yourself. It’s a big day in the life of a startup when you’re finally generating enough revenue that you can bring someone in besides yourself and your immediate family to do the work. And while that does indeed take some of the work off of your plate, it leaves you with a host of other responsibilities, including hiring, training, management. And then on top of that, there are a list of new taxes that you’ll need to be concerned with. If you’re new to employment taxes, here are a few of the things you’ll need to be on top of:

  1. Get an Employer Identification Number

If you haven’t done so already, you’ll need to obtain an Employer Identification Number (EIN) from the IRS. This number will be used in all documents related to employment taxes, and in other places as well. You’ll need to file IRS Form SS-4, which you can download from the IRS website.

  1. Register with the labor department in your state.

In addition to withholding income tax on behalf of your employees, you’ll need to contribute to your state’s unemployment insurance fund, to cover relief for workers who get laid off. Check the website for the Department of Labor for your state. Most states will allow you to register online, and set up the account into which your unemployment tax payments will be deposited. 

  1. Have your employees fill out IRS form W-4. 

Every employee is required to complete IRS form W-4, also called Employee’s Withholding Allowance Certificate. This tells you or your payroll service how many allowances they’re claiming, and enables you to calculate the proper amount of employment taxes that you need to withhold.

  1. Set up a payroll system.

You can do it yourself, even on paper if you wish, but most companies either use accounting software which includes a payroll module, or use a third party payroll service. But one way or another, you’ll need a system to manage calculating employment taxes to be withheld from each paycheck for every employee. You’ll also have to be prepared to make the payments to the IRS for your employee’s income tax, as well as Social Security and Medicare. Most states also have income tax and other taxes including unemployment, disability, and family leave, which you’ll be required to withhold.

  1. File IRS form 940.

You’ll also need to file IRS form 940, to keep you compliant with the Federal Unemployment Tax Act (FUTA). This form reports all unemployment taxes that you’ve paid for your employees. Please keep in mind that while the form is only filed annually, you still need to calculate and make the payments every quarter.

If this seems like a lot of extra work, why not consider outsourcing it to knowledgeable professionals who do this work every day? At KYB, our payroll solution includes complete management of all federal and state employment taxes. We’ll keep your employees paid on time and accurately, keep you in compliance with the government, and hopefully eliminate some of your headaches while we’re at it.

 

 

Topics: Business Tips