Payroll refers to the body of taxes and laws regarding paying of employees, which includes owner-operators of certain types of businesses. If you have a regular job (you gave some a W-4, you get a regular check, and a W-2 at the end of the year), you are familiar with getting your weekly, biweekly, or monthly paycheck. If you run your own business, some structures permit you to divide your compensation between “wages” and “profits” for tax purposes. Other structures make all your owner-operator income into “self employment income.”
Most employee retirement accounts are tied to wages (payroll) or self employment income, so higher amounts increase your limits. However, all wages (payroll or self employment) are subject to Payroll Taxes, such as Medicare and Social Security.
Wage and hour laws requires maintaining proper records, tracking your employees time, and filing paperwork with your state and the federal government on a timely manner. Getting this paperwork together and on time is challenging, as the rules for this area of the tax code are extremely complex.
We partner with Gusto as our goto payroll solution, but we also work with clients that use other systems including ADP, Paychex, and Intuit’s offerings. We use Gusto internally to manage our payroll, and have set it up for dozen of clients without difficulty. Gusto will also manage contractor payments, enabling you to handle your 1099 Workers as well, sending their payments via Direct Deposit (ACH) and supplying the 1099-NEC (formerly 1099-MISC) forms on time in Janaury.