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  • Business owners should feel like shouting “mayday” when preparing for pay day. Unfortunately, payroll management can be a time-consuming, frustrating ordeal for owners if they don’t have any help. 

    Payroll needs to be done securely, accurately, and on-time, which leads to extra aggravation, but it’s better than having several employees questioning where their paychecks are or why they’re incorrect. Online payroll helps business owners streamline the process by giving them the tools to make management faster and easier. Here are three big benefits of using online payroll for your business. 

    Image of a keyboard for online payroll.

    Payroll Access with an Internet Connection

    You don’t have to be stuck behind your desk to manage or access payroll information anymore. Online payroll gives you the freedom to do it, well, online. Now you can securely handle payroll tasks anywhere there’s an internet connection, giving you more freedom to take care of business away from your desk.

    Simplified Payroll Reports

    You shouldn’t have to struggle with your data. Online payroll makes it easier to integrate your payroll information with financial reporting data and allows you to generate reports when you need them. That allows you to base your decisions on accurate, up-to-date information without having to scrounge around your office for all the necessary files.

    Time Savings

    You may have guessed it by now, but online payroll is a major time saver. In addition to the convenience of online access and easily generated reports, there are several other time-saving benefits, such as simplified compensation calculations and payments and tracking for deductions and paid time off. Payroll can take hours to complete. Online payroll shrinks that time commitment so that you can focus your energy elsewhere.

    Don’t get stuck spending hours filing reports and solving W-2 riddles. GMS provides online payroll services to make your payroll process simpler, safer, and stronger. Contact us today to talk to one of our payroll experts about our services.

  • Paper has played a huge role for businesses. Legal documents and contracts can be found in offices around the country. Business cards and print ads helped to seal deals for decades. Even money is printed on paper. Thanks to technology, however, the times have been a changin’.

    In this digital age, businesses can cut down on paper usage in favor of online documents and processes. It’s become so popular that, according to a study on document-creation site Nitro, 49 percent of CEOs name sustainability as a top three initiative for their organization. A paperless workplace is a great way to achieve that goal.

    Why Businesses Go Paperless

    At this point, you may be thinking, “Yeah, that sounds great, but how does going paperless actually help me?” Independent Business Consultant Larry Alton lays out six big reasons on Inc.com on why businesses should make the move to cut out paper:

    • Time
    • Access
    • Space
    • Security
    • Money
    • Environment

    Today, there’s no need to physically print out, file, and search for documents. Everything can be securely stored online through the cloud, which means less time spent handling paper documents that could fill several filing cabinets or storage boxes. Also, online documents can be accessed 24/7 from any location with an internet connection.

    After all of that, there’s also the savings. Alton cites that paperless offices save “roughly $80 per employee (annually) in costs related to paper, ink, toner, storage space, and postage.” He also adds that the average firm uses more than 10,000 pieces of paper in a year. That means a paperless initiative can help both your wallet and the environment.

    However, it’s tough to create a completely paperless business. According to Nitro, only 3 percent of businesses have eliminated paper from every process. 

    Between old traditions that die hard or businesses that still need to maintain at least some sort of paper usage, a 100 percent paper-free environment isn’t necessarily attainable. However, businesses can still receive some of the benefits of going paperless by making small changes over time. One great place to start is paperless payroll.

    Start Small with Paperless Payroll

    Changing your payroll process can be an easy first step toward going paperless. Instead of dealing out paper checks for every single employee, businesses can work with an online payroll provider to streamline the process and save through direct deposit (also known as electronic funds transfer) or global cash cards. There’s added costs to paper checks.

    Just how much can businesses save on paperless billing? Due to physical resources and processing fees, it may be more than you may think. A report in Business News Daily states that “businesses save between $2.87 and $3.15 per pay run by paying employees electronically, such as via direct deposit, instead of via paper check.” The report also points out that online pay stubs save an additional $1.20.

    Online payroll is one simple way to cut down on some unnecessary costs and inconveniences. As a Professional Employer Organization, we can provide online payroll services to make the move to a paper-free company. Contact us today to talk to one of our experts about online payroll services and software for your business. 

  • Payroll is an important part of every business. While some small business owners take the time and effort to handle payroll administration in-house, certain factors can signify that outsourcing payroll with a PEO might be in your best interest. Here are some signs that it may be time to consider a switch.

     Image of a business owner considering online payroll services.

    1. When You Just Don’t Have Enough Time

    Business owners have plenty of work to do, and managing payroll is just another task that fills up your schedule. According to business counseling nonprofit SCORE, over half of small business owners spend at least 3-to-5 hours each month to manage payroll in-house. 

    Those are valuable hours that could be spent focusing on ways to grow your business. Depending on how much you work each week – The Alternative Board cites that half of small business owners work more than 50 hours per week – outsourcing these services can save you that precious time that owners constantly need.

    2. When You’re Worried About Payroll Tax Compliance

    Compliance issues can come about in a couple of different ways.  As discussed, processing payroll is a time intensive and tedious process, which can cause certain compliance requirements to slip through the cracks.

    Additionally, you may lack the expertise in knowing exactly what you need to do to keep your payroll compliant with any related regulations. Either way, mistakes can happen when you haven’t been trained to handle payroll.

    Just how big of a concern are payroll tax penalties? In 2013, the IRS doled out 6.8 million penalties, costing business owners a combined $4.5 billion in fees. These penalties range from simply not filing your payroll taxes on time to more complicated issues like not weighing multi-state payroll compliance needs for minimum wage and other regulations. If you’re not careful, you might be subject to some fines, on top of the time and money spent managing your payroll.

    3. When You’re Tired of Dealing with Paper

    After years of managing payroll, a business can go through a lot of paper. While some owners are attached to handing out physical checks, paper documents build up over time and take up plenty of storage space. That also means that you have to dig through all those files when you or your employees need to reference old documentation. With online payroll, those hassles are eliminated, as everything is securely stored online and can be accessed 24/7 with an internet connection. 

    There’s also the monetary benefit of cutting out paper payroll. Offices tend to save “roughly $80 per employee (annually) in costs related to paper, ink, toner, storage space, and postage” by switching to paperless payroll. Also, many PEOs won’t charge you extra for direct deposit services, so you’ll save a decent chunk of money for switching to a service that makes the payroll process simpler for both you and your employees.

    4. When Your Business Starts to Grow

    Business growth is great, but it comes with some extra responsibilities. As your business grows, so does your payroll. That means that payroll management will take longer, involve more chances for error, and make for even more paper printouts. Of course, it also means that other parts of your business may require more attention as well. It’s a good problem to have, but one that requires your full attention for your business to continue to grow.

    Whether your business is growing or you’re noticing another sign that it’s time to outsource your payroll, Group Management Services can help. As a Professional Employer Organization, we specialize in providing comprehensive HR solutions for businesses, including online payroll services. Contact GMS today to talk to one of our experts about how we can help your business through payroll management.

  • QuickBooks software remains one of the most widely used accounting applications for small and midsize businesses, according to Forbes. Over the years, it has evolved from an on-premise solution to a comprehensive cloud-based system, which competes with several other online payroll and accounting software.

    QuickBooks remains a popular accounting solution, but outsourcing payroll to a Professional Employer Organization (PEO) offers significant advantages, especially for growing companies. Let’s explore the key differences and benefits of outsourcing payroll:

    Software And Add-On Costs

    While QuickBooks offers various versions tailored to different business needs, the advertised pricing structure differs from a PEO. Essential payroll features often require additional monthly fees and per-employee charges. For instance, some of QuickBooks’ payroll options come with extra costs for direct deposit, tax filing, and W-2 processing. In contrast, PEOs typically offer more comprehensive services with transparent pricing structures, covering a wider range of functions without hidden fees.

    Automation And Efficiency

    QuickBooks automates some payroll functions, but outsourcing to a PEO takes efficiency to the next level. PEOs handle all aspects of payroll processing, significantly reducing manual work and saving business owners time to focus on core business activities. Partnering with a PEO allows your business to streamline processes, reduce administrative burdens, and gain access to additional HR services.

    Tax Compliance And Liability

    Relying on one internal employee or QuickBooks user to manage payroll can carry a high margin for error. One of the most significant benefits of outsourcing payroll is tax assistance. PEOs take responsibility for paying all federal and state taxes and handling wage garnishments. With QuickBooks, these responsibilities fall on the business owner, increasing the risk of errors and penalties. PEOs ensure compliance with ever-evolving payroll regulations, reducing the probability of costly mistakes.

    Scalability And Flexibility

    PEOs are better equipped to handle rapid business growth and increasing employee headcounts. They offer greater scalability and can adapt to changing needs, including complex pay structures and multi-state compliance. This flexibility is crucial for businesses expecting significant growth or seasonal fluctuations in staffing levels.

    Comprehensive HR Services

    Unlike QuickBooks, which focuses primarily on accounting and payroll, PEOs offer a full range of HR services. This includes benefits administration, workers’ compensation, hiring and termination support, compliance assistance, and more. PEOs provide pooled rates for employee benefit plans, which can be particularly beneficial for startups and small businesses looking to offer competitive benefits without incurring high costs.

    Expertise And Support

    PEOs provide access to dedicated payroll specialists who can answer complex financial questions and offer personalized support. This level of expertise is not always available with software solutions like QuickBooks. GMS’ payroll experts will handle all the details, from filing the necessary paperwork to the ongoing maintenance of tax records. Our team will also keep your business up to date with the complex tax filing requirements as they inevitably change and complicate your payroll processes.

    Cost-Effectiveness For Growing Businesses

    While QuickBooks may seem cheaper initially, PEOs can be more cost-effective for growing businesses. PEOs handle the complexities of scaling without requiring additional in-house resources. PEOs also offer your company greater buying power for employee benefits through economies of scale and reduced administrative overhead.

    Risk Reduction

    Outsourcing payroll to a PEO significantly reduces the risk of errors associated with manual entry and limited training. This is particularly important as payroll involves sensitive data and complex calculations. PEOs have systems in place to ensure accuracy and compliance, mitigating the risk of costly mistakes and penalties. GMS’ payroll software integrates with other platforms, allowing us to seamlessly calculate and apply deductions for health insurance and other employee benefits. Meanwhile, all your data and documentation are securely stored online so that you can eliminate countless paper copies and waste.

    Time Savings

    The basic version of QuickBooks is designed for users with limited accounting and financial needs. This gives them less of a learning curve, but it also means that they aren’t likely to have all the functionality and features that a business owner needs.

    On the other hand, more advanced versions of QuickBooks require significant ongoing training to ensure they are being used correctly. Having an in-house, credentialed QuickBooks user means that ongoing training will need to be planned for, due to continuous updates to the software.

    By outsourcing payroll to a PEO, business owners can free up significant time previously spent on data entry, tax filings, and ongoing software training. This allows them to focus on core business activities and growth strategies.

    GMS Connect

    GMS’ online payroll software, GMS Connect, makes running payroll simple. Our online technology streamlines the payroll process to create less paperwork and give users access from anywhere with an internet connection. GMS Connect is an SOC 1-certified human resources information system (HRIS) that helps business owners manage the entire lifecycle of their business. These capabilities give you access to cutting-edge payroll management software that helps you improve your bottom line. GMS Connect has many features, including:

    • Easily calculate payroll deductions with built-in benefits and time-tracking features
    • Generate on-demand payroll reports
    • Keep track of payroll records in one central repository
    • Electronic payroll processing via direct deposit
    • Streamlined payment for all types of workers (e.g., salaried, hourly, contract)
    • Effortlessly submit payroll taxes and process W-2s
    • Simplify workers’ compensation calculations and payments

    Streamline Payroll Processes With A PEO

    While QuickBooks has its merits for small businesses with simple needs, outsourcing payroll to a PEO like GMS offers substantial benefits for growing companies. PEOs provide comprehensive payroll and HR solutions, reduce liability, ensure compliance, and offer scalability to match your business growth.

    PEOs handle complex tasks such as multi-state tax compliance, benefits administration, and workers’ compensation, allowing you to focus on your core business operations. By partnering with GMS, you gain access to expertise, reduce risks, and position your company for efficient growth and success in the future. Contact GMS today to learn how our PEO services can streamline your payroll processes and support your business’s expansion.

  • Let’s be honest; what business owner looks forward to managing payroll? While payday may be exciting for your employees, it’s likely that you’re not thrilled about having to put together payroll reports, track deductions, and oversee every other critical aspect of payroll administration, especially if you do everything by paper. 

    For some small business owners, payroll administration is just a necessary part of business life and the business isn’t big enough to justify its own HR department. While payroll administration is necessary, it doesn’t have to be a big burden. Online payroll software can give you the tools to take some of the pain out of payday preparation. Here are a few questions you should consider when evaluating your payroll management process.

    Small business owner using online payroll software. 

    Do You Spend Too Much Time on Payroll Administration?

    Payroll management takes time. A survey conducted by the National Small Business Association found that more than half of owners who handled payroll internally spent at least three to five hours per month on the administration of payroll taxes alone. That time doesn’t even include other key payroll functions like processing paychecks, keeping records, and answering questions from employees. 

    Five hours per month may not sound like a lot, but it adds up to 60 hours of payroll administration per year. That’s more than a full work week of time solely dedicated on payroll, and that’s if you only spend five hours per month. Depending on your situation, you could easily spend more time to try and keep your business compliant with payroll tax requirements. If you cut down the time you had to spend on payroll administration, it would free you up to focus on other key projects that can help you grow your business (or even take a well-deserved break every now and then).

    Are You Afraid of Payroll Taxes?

    It’s important to spend time to make sure your payroll is managed correctly, as noncompliance can be costly. According to the Federal Register, the Department of Labor increased the penalties for payroll tax violations effective Jan. 13, 2017, making penalties even more expensive now than they were in the past. 

    When you aren’t a trained payroll professional, mistakes can happen even if you spend more time on payroll tax management. A miscalculation or missing piece of information is all it takes to incur a penalty. Payroll software allows you to easily keep track of deductions online without having to shuffle through old sheets of paper to determine if you did everything right.

    Is Your Business Growing?

    Even if you have a handle on your business’ payroll now, that may not be the case in the future. The more employees you add, the more work will be necessary to complete payroll. If you handle payroll offline, that means more storage space for documents, more potential for mistakes, and more strain on your schedule. 

    Just because your business grows doesn’t mean that your already-hefty workload needs to get bigger. Online payroll allows you to manage everything from any location as long as you have an internet connection. Thanks to the ability to complete payroll in a fraction of the time, you can add more employees without worrying nearly as much about how much longer it’ll take you to handle payroll administration each month.

    Online Payroll for Small Businesses

    Small business owners wear many hats, but you don’t have to be on your own when it comes to payroll management. Outsourcing payroll administration to a Professional Employer Organization allows you to lessen your workload while gaining the benefits of online payroll services. Not only does this mean you can make the move to online payroll, but you also have access to a dedicated payroll specialist who can provide you with help when you need it.

    Considering investing in online payroll software? Contact GMS today to talk to one of our experts about how payroll software can help you and your business.

  • As a business owner, you likely didn’t start your venture with the excitement of managing payroll. Managing payroll is a daunting task due to its complexity and the meticulous attention to detail it requires. Staying compliant with the changing payroll tax regulations and labor laws adds another layer of difficulty. Mistakes in payroll can lead to significant financial penalties and damage employee trust, making accurate payroll management crucial but challenging.


    The time-consuming nature of payroll management can also detract from focusing on core business growth strategies. Fortunately, online payroll software offers a solution to streamline this process, allowing you to redirect your efforts toward business expansion. However, some business owners remain skeptical about transitioning to digital payroll solutions. Let’s address three common myths about online payroll software and reveal the truth behind them.

      

    Myth 1: Switching To Online Payroll Software Is Complicated

    Fact: While manual payroll management is indeed complex and time-consuming, transitioning to an online system is designed to simplify the process. The right software can streamline payroll tasks for both employers and employees, reducing the burden of paperwork and manual calculations.

     

     For instance, GMS’ online payroll is tailored to meet your specific needs and facilitate a smooth transition. We provide a dedicated payroll specialist to guide you through the setup process, answer questions, and ensure both you and your employees are comfortable with the new system. Our team collects necessary employee information to build your custom payroll system and offers personalized walkthroughs. Should any issues arise, dedicated support is readily available.

      

    Myth 2: It’s An Unnecessary Expense

    Fact: While there is a cost associated with online payroll software, it’s important to consider the time and resources it saves. According to The Business Journals, a survey found small business owners spend five hours or more each pay period, or 21 days each year, managing payroll. Online payroll software significantly reduces this time investment, allowing you to focus on core business functions.

    GMS’ online payroll system offers features that streamline the payroll process, including:

    • Easy tracking of deductions
    • Simplified workers’ compensation calculations and payments
    • Generate on-demand payroll reports
    • Direct deposit setup
    • Scan signed documents for compliance needs

     Moreover, access to payroll experts can help prevent costly errors, potentially saving your business from IRS penalties. The flexibility to manage payroll remotely is another significant advantage, enabling you to handle payroll tasks from anywhere with an internet connection.

      

    Myth 3: I’ll Lose Control Over My Payroll

    Fact: Investing in payroll software through a Professional Employer Organization (PEO) does not mean relinquishing control over your payroll. Instead, it provides you with enhanced tools for easier payroll management and access to expert support when needed.

      

    With GMS’ online payroll software, you maintain full control. The software doesn’t replace your accountant; it simply provides efficient tools to streamline payroll management. You can even customize what employees see when they log into the payroll site, ensuring you always stay in charge while benefiting from simplified processes.

      

    Take Your Time Back With Online Payroll Services

    In today’s fast-paced business environment, leveraging technology to streamline operations is crucial. GMS understands this need and offers comprehensive payroll solutions designed to save time, reduce errors, and provide expert support. Our online payroll software, combined with our team of payroll experts, ensures that you can manage your payroll efficiently while maintaining full control.

      

    By choosing GMS, you’re not just getting software; you’re gaining a partner committed to your business’s success. Our payroll services, backed by cutting-edge software and knowledgeable professionals, can help you navigate the complexities of payroll management with ease. Whether you’re looking to improve efficiency, ensure compliance, or simply free up more time to focus on growing your business, GMS has the tools and expertise to support your goals.

      

    Don’t let payroll management hold your business back. Contact GMS today to learn how our online payroll solutions can benefit your business and propel it toward greater success.

  • Whether you have a single paid employee or run a small business with many employees, you need to pay attention to payroll. However, payroll involves more than cutting a few checks. Good payroll management is comprised of several different functions that help you properly pay your employees and keep your business compliant with government regulations.

    Payroll documents for a business handling payroll management. 

    Processing Paychecks

    While payroll management involves more than just paying people, proper paycheck processing is still a critical function. Employees don’t appreciate paycheck errors, so a payroll manager needs to verify several details that go into an employee’s compensation. This includes verifying salary and hourly rates while also accounting for regular and overtime hours. Additional compensation in the form of vacation time, holiday pay, and other factors may also apply.

    Another part of processing paychecks is applying any necessary deductions. Some of these deductions, such as federal income tax, are mandatory. Other are optional depending on the employee. For example, an employee who has opted into a company’s group health insurance and 401(k) plans will have insurance premiums and retirement contributions deducted from his or her paycheck.

    Handling Payroll Taxes

    Your employees aren’t going to be the only people upset if you don’t correctly process payroll. Roughly 70 percent of the IRS’ annual revenue is made up of payroll taxes. This means failing to pay payroll taxes can be a costly mistake, as businesses are hit with billions of dollars in payroll tax penalties each year. 

    Payroll managers need to weigh several factors to determine tax deductions, as different regions will have different tax rates. Then they must complete several forms documenting payroll taxes, which includes filing W-2s for each employee by Jan. 31 and completing a 941 form that reports the employment taxes an employer withholds and contributes each quarter. Not only do these files need to be filed accurately, they need to be filed on time, which can be difficult for someone without any training in payroll tax management.

    Keeping Records

    In addition to payroll tax compliance, payroll management also includes a great deal of recordkeeping. The Fair Labor Standards Act (FLSA) requires employers to keep accurate records for every non-exempt worker. These records include:

    1. Employee’s full name and social security number
    2. Address, including zip code
    3. Birth date, if younger than 19
    4. Sex and occupation
    5. Time and day of week when employee’s workweek begins
    6. Hours worked each day
    7. Total hours worked each workweek
    8. Basis on which employee’s wages are paid (e.g., “$9 per hour,” “$440 a week,” “piecework”)
    9. Regular hourly pay rate
    10. Total daily or weekly straight-time earnings
    11. Total overtime earnings for the workweek
    12. All additions to or deductions from the employee’s wages
    13. Total wages paid each pay period
    14. Date of payment and the pay period covered by the payment

    The FLSA also states that payroll data should be kept on file for three years. Records that involve wage computations should be kept for two years, such as work schedules, time cards, and other related documents. A payroll manager can ensure that these documents are stored electronically in case the Department of Labor [DOL] ever decides to check in on a business.

    Employee Accessibility

    It’s important to have financial documents readily available for the DOL, but employees should also be able to access key payroll information. An online employee portal like GMS Connect gives workers a secure online place where they can access personal information, such as:

    • Benefits summaries
    • 401(k) summaries
    • Check history and deduction totals
    • Direct deposit details
    • Time clocks
    • Paid time off 

    In addition, GMS Connect allows employees to download and print out important documents such as W-2s, change tax settings, and make payroll inquiries, which gives your employees the power to answer their own questions come tax season.

    Simplify Payroll Management with the Help of a PEO

    Payroll isn’t easy. As a small business owner, you may not have an HR department to deal with the responsibilities and liabilities of payroll management. However, that doesn’t mean you need to manage payroll on your own.

    Outsourcing payroll administration to a Professional Employer Organization can help you ease the burden of managing payroll for your business. GMS can help you handle all the important financial details, allowing your business to effectively manage payroll and stay compliant. Contact GMS today to talk to one of our experts about how outsourcing payroll administration can benefit your business.

  • On Dec. 20, 2017, Congress passed the most significant tax reform act in over 30 years. Business owners have been clamoring for this type of reform, but now that it’s passed, what does it mean? Who wins and who loses?

    The National Association of Professional Employer Organizations produced a comprehensive 40-page breakdown of the tax bill. Don’t have the time, stomach, or patience to read it? I’ll touch on a few of the highlights.

    Image of a breakdown on the Tax Cuts and Jobs Act of 2018. 

    Breaking Down the Tax Cuts and Jobs Act

    While the effects probably won’t be known for a few years, the gist of the legislation is the simplification of tax filing in future years. In exchange for reducing individual and corporate tax rates, many deductions have been eliminated. The extent and scope of the net gain or loss depends on your situation.

    As an individual, the reform increases your personal deduction from $10,000 to $12,000 for individuals and from $20,000 to $24,000 for married couples. There have been some changes in the child tax credit based on the age and number of children. The consensus is that this reform will be great for couples with no children, but it could be harmful to large families.

    For business owners, the good news is you’re going to see reductions in your tax rates. The potential downside is a large number of you are going to see the elimination of employee work-related expenses.  Among those are:

    • Mileage expenses
    • Union dues
    • Uniform expenses
    • Work safety expenses
    • Travel expenses
    • Moving expenses
    • Casualty and theft expenses

    As you can see, the trade-off costs are potentially significant and a radical departure from what you’ve been used to. With this kind of paradigm shift, it’s little wonder that most are comparing this reform to the Reagan tax reform of the mid-1980s. 

    Please keep in mind that these are my observations based on limited information along with input from accounting experts. Only your accountant is knowledgeable enough about your business to give you the best advice going forward.

    Next Steps for Business Owners

    With the elimination of a lot of expenses, you may be looking for new avenues of cost savings for your business. That’s where a PEO, like GMS, might be able to help. If you’re looking to grab control of your workers’ comp, healthcare, unemployment, and HR costs, many of the programs GMS has implemented for our 1250-plus clients can do just that. Contact us today to talk to one of our experts about how a PEO can help your business.

  • Payroll taxes are complicated, especially when you don’t have any payroll training. Small business owners have several tax responsibilities that they must manage throughout the year, which can take up hours of your time each month. Of course, if you incorrectly calculate the tax withholdings for someone’s paycheck, both the employee and the federal or state government may have a bone to pick with you.

    One of the most time-consuming and difficult parts of payroll tax management is that there is more than one type of tax that you need to handle. You are responsible for withholding multiple types of taxes from your employees’ wages, including income tax and payroll tax. These taxes each have specific rules in terms of how you and your employees contribute to them and what groups regulate them. Here’s a rundown of the difference between income tax and payroll tax.

    Income tax and payroll tax documents for a small business.

    What is Income Tax?

    Income tax is part of what the IRS deems as employment taxes, which also includes items like unemployment taxes. In all, income tax is comprised of federal, state, and local income taxes, depending on where your business and employees are located. These taxes are used to fund public services such as parks, education, and other programs.

    Federal income tax is mandatory for employees in all states. The amount of federal income tax you withhold from each employee’s paycheck will depend on the allowances they selected on Form W-4, which is required for each employee after they’re hired. The more allowances an employee claims, the less you’ll generally have to withhold from his or her paycheck. The IRS’ Publication 15 provides calculation methods and table so that you can determine what needs to be withheld from each employee’s paycheck.

    State and local income tax are regulated by individual state and local governments. However, only 41 states require employers to withhold state income tax from employees’ wages. Two states—New Hampshire and Tennessee—have income taxes that don’t apply to employment income. The seven other states simply don’t have any income taxes to worry about at all:

    • Alaska
    • Florida
    • Nevada
    • South Dakota
    • Texas
    • Washington
    • Wyoming

    Local income taxes are not nearly as common as state income taxes. There are only 16 states that require you to withhold local income taxes in addition to state and federal income taxes:

    • Alabama
    • Arkansas
    • Colorado
    • Delaware
    • Indiana
    • Iowa
    • Kentucky
    • Maryland
    • Michigan
    • Missouri
    • New Jersey
    • New York
    • Ohio
    • Oregon
    • Pennsylvania
    • West Virginia

    While you can use Publication 15 for instructions on how to calculate federal income tax, state and local income taxes are dependent on the location of your business and your employees. Each state has its own rates for state and local income tax (if applicable), some of which will be a flat percentage while others have their own personal allowance system that require additional calculations. You’ll need your state government’s site to find specific details in terms of withholding rates and depositing schedules.

    It’s also important to note that while your business may be in one state, out-of-state employees may be subject to different payroll regulations depending on their location. This can affect the amount of income tax you withhold from these employees’ wages and open you up to non-compliance penalties, so make sure you stay up to date with the regulations for different states and local governments if they apply to your employees or multiple business locations.

    What is Payroll Tax?

    While multiple taxes affect payroll, the IRS does have a more specific definition for “payroll taxes.” These taxes are also known as FICA taxes and are a combination of Social Security and Medicare taxes, both of which fall under the Federal Insurance Contributions Acts (FICA). As expected, these taxes are used to fund Social Security and Medicare programs.

    Unlike federal income tax and some state and local income taxes, payroll taxes are based on a flat percentage. However, FICA taxes also call for both employees and employers to contribute to them. For Social Security tax, both parties contribute 6.2 percent of an employee’s wages up to a wage base of $128,400 for 2018. Medicare tax is similar in that both the employer and employee contribute 1.45 percent of the employees wages up to the following wage base limits:

    • $200,000 for employees who are single
    • $250,000 for employees who are married and file jointly
    • $125,000 for employees who are married and file separately

    However, Medicare also requires you to withhold an additional 0.9 percent of wages once an employee passes those wage base thresholds. As an employer, you are not required to match this additional 0.9 percent contribution.

    Stay on Top of the Payroll Process

    The multiple types of taxes involved in the payroll process are just one reason why one third of small businesses spend at least 40 hours per year managing payroll taxes. Add in the potential for mistakes that can lead to fines from the IRS and it makes sense why many small business owners turn to outside companies to help them manage their payroll.

    As a Professional Employer Organization, GMS has a team of experts that can help decrease your payroll responsibilities and liabilities while saving you valuable time. Contact GMS today to talk to one of our experts about how outsourcing payroll administration and other HR functions can benefit your business.

  • There’s more to payroll than calculating wages and submitting pay stubs. Payroll management is a detailed process that requires business owners to properly compensate employees for services performed, which includes calculating employee hours, distributing pay, withholding taxes, and keeping detailed financial records. As a business owner, this can be a lot to tackle. Luckily, there are trusted companies like Group Management Services (GMS) that can provide payroll services to business owners just like you.


    Although outsourcing payroll services is more expensive, it can save you time and potentially reduce compliance issues. When you outsource payroll administration to an outside company, such as a professional employer organization (PEO), you have access to payroll experts who take care of every function of payroll management, such as recordkeeping, handling payroll taxes, and processing paychecks. While a PEO like GMS streamlines these payroll processes, you will still retain full control and direction over your employees.

    As a PEO with strong data security, quality customer service, and accurate payroll processing technology, Group Management Services can be the trusted partner that decreases your workload, lowers liability, and ensures compliance.   


    Setting Up Your Payroll 

    Before you can begin running payroll, you need to set up your payroll system. The first step involves registering for an Employer Identification Number (EIN). 

    1. Apply for an employer identification number

      An employer identification number is a unique nine-digit number the Internal Revenue Service (IRS) assigns to identify each business. EINs are also used for filing tax returns, submitting payroll, and providing identity protection for your company. You can obtain an EIN for free on the IRS website. Additionally, depending on local and state government regulations, you may need a state ID number to pay state income taxes. Learn more about your state’s registration requirements here.


    2. Collect employee information
      To properly pay your employees, you need to collect the necessary information. Employers must obtain each employee’s full name, address, Social Security number, and tax withholding forms. Each employee must also fill out the following government documents:
      • Form I-9: Employee Eligibility Verification 
      • Form W-4: Employee’s Withholding Certificate 
      • State withholding allowance certificates
        • In most states, you’re required to withhold state taxes, as well as federal income taxes, from employee wages. Therefore, your employees must complete the IRS Form W-4 or a state withholding certificate. 
    3. Determine a payroll schedule
      After collecting the necessary business documentation and employee information, it’s time to choose a payroll schedule. A payroll schedule is the length of your pay period and determines how often you pay your employees. The most common pay schedules are weekly, bi-weekly, or monthly.  

    It’s important to note that your pay schedule should meet state regulations and fit your employees’ needs. For example, a payroll schedule may differ for a business that employs all salaried workers compared to a company that employs mostly hourly employees. 


    Payroll Management 

    Once you’ve obtained your EIN, the necessary employee information, and selected your payroll schedule, it’s time to run your first payroll. We’ve listed a brief overview of how to get started running your first payroll: 

    1. Calculate gross and net pay
      To calculate gross pay, you must add up the hours worked by an employee during the predetermined pay period; make sure to include bonuses or overtime pay. The total hours worked is then multiplied by each worker’s pay rate to determine the gross pay. Employers often use timesheets, punch clocks, spreadsheets, or timekeeping software to make time tracking easier. 

      After calculating gross pay, it’s time to make your pre-tax deductions. If you offer your employees benefits such as a 401(k) retirement plan, health benefits, or life insurance, then you’ll need to withhold those contributions. Next, you must deduct Federal Insurance Contribution Act (FICA) taxes, which include federal and state income tax, Social Security taxes, and Medicare taxes. Then, you must subtract the post-tax deductions, which may include court-ordered wage garnishments or union dues. 

      When all pre-tax and post-tax deductions are subtracted from the gross pay, your final number is your employee’s net pay or the amount your employee takes home. 

    2. Pay employees and deduct withholdings

      After making your payroll calculations, you’re ready to generate paychecks and initiate direct deposits. Payroll taxes must be filed with the government regularly and vary based on local regulations, business size, and location. You may be liable to pay the IRS if you fail to withhold the employee portion of employment taxes. 


    Filing And Documentation 

    While calculating payroll and tax deductions is an important part of processing payroll, you also must file these deductions with various agencies, including the federal government.  These tax reports include: 

    • Form 941 – Employer’s Quarterly Federal Tax Return
      • Employers use this form to report income taxes, Social Security taxes, and Medicare taxes withheld from employee paychecks. 
    • Form 940 – Employer’s Annual Federal Unemployment (FUTA) Tax Return 
      • Only employers pay FUTA taxes – DO NOT deduct FUTA tax from employee wages. 

    After filing these reports, you must document and store these records. Filed records should include tax filings, pay stubs, and employee information such as address, occupation, birth date, and more. Business owners must keep all payroll records and documentation for at least three years. Failure to do so may result in costly penalties or non-compliance fees. Businesses that violate Fair Labor Standards Act (FLSA) requirements, such as minimum wage, overtime pay, or record-keeping, may be fined up to $1,000 per violation. Keeping payroll records is also useful when you send your annual report to the IRS and can provide evidence if there is ever an employee compensation dispute or audit. These fees can quickly add up and take their toll on your bottom line. 


    Choosing Your Payroll Process 

    It’s important to note that there’s more than one way to process your payroll. The best option for your company may depend upon your industry, budget, the type of workers you have, or the amount of time you have. There are three main options to choose from: 

    1. Manual payroll
      Manually processing payroll is the most inexpensive way to process it. Despite the fact that manually processing payroll is less expensive than software or outsourcing, you, as a business owner, will be liable for any mistakes made. If you’re like most business owners who don’t have extensive payroll training, manually managing payroll can leave you vulnerable to costly errors and IRS penalties.  

    2. Payroll software
      Investing in payroll software allows you to streamline your payroll process by managing tasks online, automating payroll calculations, and more. While software can save time and simplify the overall process, you will still need to oversee payroll compliance and management. 

    3. Outsourcing payroll
      Although outsourcing payroll services is more expensive, it can save you time and potentially reduce compliance issues. When you outsource payroll administration to an outside company, such as a professional employer organization (PEO), you have access to payroll experts who take care of every function of payroll management, such as recordkeeping, handling payroll taxes, and processing paychecks. While a PEO streamlines these processes, you will still retain full control and direction over your employees. 

    GMS: A Trusted Payroll Partner 

    Whether you’re a payroll expert or not, the payroll process can be tedious. It can also be time-consuming to manually calculate paychecks or stay up to date on payroll regulations and important filing dates. Luckily, Group Management Services (GMS), a PEO, can take the burden of payroll off your shoulders.  

    With GMS’ state-of-the-art payroll technology and dedicated Payroll Specialists, you can spend less time worrying about overtime calculations and tax deductions and more time focusing on growing your business. As a PEO with strong data security, quality customer service, and accurate processing technology, GMS can be the trusted partner that decreases your workload, lowers liability, and ensures compliance.  

    Contact GMS today to simplify your payroll process!