This is an excerpt from a presentation I give to prospective business owners.
In part 5 I talked about how to determine if someone you hire is an employee or an independent contractor.
In this part, I’m going to talk more about the responsibilities that come with having employees.
There are tax considerations and non-tax considerations when you have employees.
From the tax side of things, you’ll need to do the following if you have employees:
- Get set up with the IRS, Iowa income tax and Iowa unemployment tax
- Withhold taxes from each paycheck
- Your business must pay employment taxes, too
- Periodically submit those withholdings and payroll taxes to the government
The government takes these things very seriously!!!!!!!
Taxes should not be the only thing you worry about when you have employees. Consider:
- You’ll probably need to get workers’ comp insurance
- You’ll need to develop internal procedures and rules. You’ll need to deal with HR issues. In other words, you’ll have to manage other human beings. In my experience, many of us who own businesses — especially when we start as a side business and then grow into needing employees — are AWFUL at managing people.
- Can you afford to consistently pay an employee? Can you afford to consistently pay the payroll taxes? If you answer “no” to either question, you should reconsider having employees, or take a harder look at how many employees you think you need and how much you plan to pay them.
“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”