By Karen White, VP of Product Management, PayCycle®, Inc.

If you’re a small business employer, now is the perfect time to get your payroll in shape for 2007. Whether you’re paying employees for the first time or spending hours doing payroll manually, here are some helpful and important tips to make managing your payroll easy this year:

1. Stay Informed About Payroll Withholding Tax Changes – Payroll withholdings such as federal and state income taxes, Social Security and Medicare can change at any time. Without reliable tax rate updates, small businesses risk calculating taxes incorrectly and getting penalized by the IRS. In fact, a majority of small business employers regularly experience payroll tax penalties. According to IRS statistics, there were over 6.3 million payroll tax penalties assessed in 2004 – with a $388 average penalty. The easiest way to stay on top of current tax rates is to use an on-demand payroll service such as www.paycycle.com, which updates its users’ tax rates with 100 percent accuracy guaranteed.
2. Remember That Unemployment Taxes Can Change, Too – With over 400 tax updates in any given year, it’s important not to overlook changes to employer taxes. Accurate paychecks address only half of the employer’s responsibility. The employer must also accurately calculate employer-only taxes, such as unemployment.
3. Pay Taxes On Time – Once taxes have been accurately calculated, the next step is to remit them to the appropriate federal and state agencies. Employers must follow assigned deposit schedules, and it is important to stay on top of deadlines to avoid paying costly penalties. A service like www.paycycle.com can help employers avoid penalties by sending email reminders every time there is an upcoming tax payment due. The service also lets employers easily pay all federal and most state taxes electronically with a click of a button.
4. Don’t Forget to File Forms – In addition to paying federal and state taxes, small business employers must also file federal and state tax forms. Some states even require multiple filings quarterly and annually, and forms often change. Small business employers can file federal tax forms (941, 940, 944, W-2) electronically (www.irs.gov/efile). Many states also offer e-filing options. Alternatively, they can choose an in-house or outsourced payroll service that files federal and state forms – either electronically or with pre-filled “signature-ready” forms.
5. Recognize Contractor Responsibilities – Even if small business employers hire contractors that aren’t subject to payroll tax regulations, they are still responsible for giving them Form 1099-MISC at the end of the year and for reporting their payments to the IRS. 1099-MISC forms can be easily created, printed and electronically filed with www.paycycle.com for as little as $25 for up to 50 forms.
6. Leverage the Internet to Make Payroll as Easy as a Click – On-demand solutions are becoming increasingly popular with small business employers as they look to the Internet for tools to help simplify managing their businesses. Payroll is no exception. By choosing a reliable solution to make sure their payroll is in good hands, small business employers can save themselves both time and hassles. This leaves more time for small employers to do what they do best – build their businesses.

For further information, click on the “Payroll” link within Microsoft Money Plus Home & Business, visit www.paycycle.com/money or call 866-729-2925.