Frequently Asked Questions Regarding Company Payroll

1. What is the minimum wage?

   The current federal minimum wage is $6.55 per hour, although effective 7/24/2009 the minimum wage will increase to $7.25. Some states have different laws and you should always verify with the state in which your are paying employees to verify the state minimum wage and wage laws. 
   
   

2. Do I have to pay overtime?

   Yes. Other than exempt employees, any hours worked over 40 in one work week must be paid at time and one half. Some exceptions do apply but overall if your employees work over 40 hours in a work week, overtime must be paid.
   
   

3. When do my payroll taxes need to be deposited?

   If you are a monthly depositor, you will accumulate and hold taxes for a calendar month, then submit the taxes for that month by the 15th of the following month. If you are a semi-weekly schedule depositor, you will need to follow the following schedule: 
   
   
   • Pay dates on Saturday through Tuesday, taxes must be deposited on that current Friday. 
   • Pay dates on Wednesday through Friday, taxes must be deposited on the following Wednesday.
   
   

4. How do I pay my payroll taxes?

   The IRS prefers you electronically file your payroll taxes. You can register on line at www.eftps.com (Electronic Federal Tax Payment System). It takes approximately 15 business days to receive your four digit pin number which is needed in order to pay your taxes electronically; therefore, you will need to make sure you register in enough time so your deposits will not be late. You will want to file your taxes at least 2 days prior to the date in which they are due. You will be asked to put in a settlement date, which is the due date or the date you want your account to be debited.
   
   

5. How do I determine what kind of depositor I am?

   As a business owner, it is your responsibility to make sure your taxes are paid on time.  Even if you have a third party processing your payroll, the IRS leaves the burden with the owner. The IRS uses what they call a “Lookback Period” to determine the depository schedule of a business. The lookback period runs from July 1st through June 30th. Starting at July 1st from the previous year to June 30th of  the current year. If more than $50,000 has been reported within the lookback period then you will be a semi-weekly depositor. If deposits reported have been under $50,000, you are monthly depositor. Please see section 11 of Publication 15 of the Circular E from the IRS for more details on depositing taxes.
   
   

6. Why is a bonus taxed differently?

   A bonus is defined by the IRS to be a “Supplemental Wage”, therefore it is taxed differently then regular wages. If a bonus is separated from your regular wages, two  forms of federal withholding methods can be used. Please view IRS Publication 15, Circular E, under subheading Supplemental Wages. You can go directly to the IRS website, www.irs.gov, the view the examples and explanation on how to tax a bonus.
   
   

7. If I have employees that work from their homes in another state, do I have to open a withholding and unemployment account in that state?

   In most cases, yes. If an employee’s services are localized in one state, which is different than the state in which the main office or base of operations is located, then typically a combined registration must be filed for that other state in which employees are solely working in. Every state has different laws so it is recommended that you file the registration forms and applications to open withholding and unemployment accounts. Each state will review the forms and should you not have to open an account that state will notify you.    
   
   

8. Is it OK to pay my federal taxes a couple of days late?

   No. The IRS has penalties and interest that accrue on the amount of taxes due. It is important to pay your taxes timely. Penalties and interest can be anywhere from 5-25%. 
   
   

9. Can I hire someone who is just working for me and pay them as a subcontractor?

   In most cases, no. If you hire someone who does not have their own business, tax identification number and certificate of insurance to cover the work they are performing in the event of damages, etc…then they generally are not considered to be a valid subcontractor but an employee. In addition, if they are solely working for you and no one else, their status would be of an employee not a subcontractor an employee not a subcontractor. As an employee you would be required to withhold and pay taxes.
   
   

10. What paperwork do I need when I hire someone?

    • Federal Forms:  I-9 and W-4
    • State Forms:  New Hire Registry and Withholding Tax form.
    
    Each state has a specific form for withholding, you can usually go the that state’s Department of Revenue website to download printable forms to give your employees.
    
    

11. Is it more beneficial to have a payroll service than to process my own payroll?

    Yes. Due to federal and state tax laws and penalties accruing rapidly, it is more beneficial to have a service take that responsibility and stress away from a business. Outsourcing allows business to concentrate on their own business and not have to worry about all the rules, regulations and deadlines associated with payroll.