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Question about Payroll in California

I have a small business with one part time employee with no benefits. I'd like to use 1099 to pay the employee but somehow this employee should be treated as a regular employee instead of an independent contractor.

Anyhow, now i have to use regular payroll with deductions . And I don't know where to start. I search around and find out that Bank of America offer free online payroll services with direct deposit within BOFA account. But with the free service, they don't do the w2 and the tax reporting to FEderal and state. (i'm not sure if i'm making sense so far) I'm very new at this, and would like your expert advice.

What do I have to do with the withholdings employee's money ? Do we deposit to government account? How's w2 works? Is it easy enough for me to maintain it myself? I just don't see the benefit of paying somebody $40 every month for just one part time employee if i could do it myself.

Thank you so much in advance. Looking forward to see all your response. :)

alwayslulu

Comments

  • You can do it yourself - BUT - you need to have a tax advisor for your business anyway simply because there are too many other things that can cause problems for you - this person should be able to show you what to do and let you know of anything else you need to be aware of as an employer and a business person. You may have some upfront cost, but probably not the monthly charge. The flip side is to go it on your own, and possibly, end up paying much more in penalties and interest for not getting it right. Sort of going back to that old advertising saying "You can pay me now or you can pay me later" - paying later is usually much more expensive.

    To start off, get IRS Publication 15 - Employer's Tax Guide from the IRS website at www.irs.gov - click on publications and enter "15" in the search box. It will have more info than you need at this point. But it will not cover the state requirements, labor laws (state and federal), workers compensation, state unemployment, state withholding, and any other business taxes (sales, use, property, privilege, etc.) you may need to know about.

    You also need to be aware of Form I-9 (eligibility to work in the US) and new hire reporting (child support).

    It will likely be worth the amount of time required to make sure you are in compliance to sit down with someone. Also - look into Score (retired executives who volunteer to help new and small businesses) which is (I think) part of the Small Business Administration - BTW - the SBA has a really good on-line handbook that covers a lot of this stuff - but personal is better because you don't have to search through a lot of stuff you don't need and you are less likely to miss something important.
  • Similar to a PEO, ASO (Administrative Services Only) or COS (Comprehensive Outsourcing Services) are some other options. Some PEO's offer ASO programs. COS might be difficult to get for just one employee, and might be more expensive than just hiring a bookeeper.
  • d26k
    d26k ✭✭✭
    Consider the value of YOUR time. If you earn/profit $20 per hour, then you could spend 2 hours a month on payroll (using your figure of $40 per month to pay someone to handle your payroll for you).

    Based on your original post, in my opinion, you have zero payroll experience. (Since you already have an "employee" and are even considering using a 1099, one could say you have less than zero payroll experience.) This means you will need exponentially more than 2 hours just getting enough knowledge to register as an employer and obtain the needed documents, let alone create the first check and reports.

    My suggestion is for you to happily pay someone $40 a month. It boils down to this - paying for experts is usually more profitable than becoming an expert yourself. To make the most money, hire others to make money for you... Ideally your business will grow to have enough income and employees so you don't have to work, otherwise you don't really own a small business, you own a "J. O. B." (something many business owners neglect to consider).

    If you have your heart set on handling your own payroll, and can make the numbers work (your time is worth a small enough figure to spend the hours needed to properly learn payroll, as well as the ongoing preparation time), find a local bookkeeper you can pay to teach you while they do the first payrolls for you. Don't forget to budget funds to cover your mistakes.