Mazuma is now Vyde

Resources

Category: Business Accounting

I’m a Blogger. Does the IRS Consider my Blog a Business or a Hobby?

We get a lot of different questions regarding tax code, but one of the most frequently asked from bloggers and creatives is if the IRS considers their blog a business or a hobby. If you have a blog and it’s providing you with even a small income, read on.

According to the Internal Revenue Code, all income is taxable unless it is specifically exempted. Translation – even if you’re not breaking even, any money you receive from your blog is definitely includible when it comes tax time.

That said, one of the main concerns, for established and novice bloggers alike, is how their blog is viewed by the IRS. It may not seem like a big deal now, but it might end up being one when you get ready to file.

There are two ways to classify blogging income – earnings are either reported as coming from a hobby or a business. So, when it comes to taxes, where does your blog fall? Answer the following questions to find out:

  1. Does the time and effort you put into your blog indicate an intent to make a profit?
  2. If there are losses, are they due to circumstances beyond your control or did they occurring the “start up phase”?
  3. Do you depend on income from the activity?
  4. Have you changed methods of operation to improve your profits?
  5. Do you or people advising you, have the knowledge needed to carry on the activity as a successful business?
  6. Have you made a profit in similar activities in the past?
  7. Does the activity make a profit in some years?
  8. Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
  9. If you’ve made a profit during at least 3 of the last 5 years, including the current year, the IRS assumes your blog is a business.

If you’re answering yes to most of these questions, your blog is a business. So what to do if you’ve got a mixed bag of answers – error on the safe side and consider your blog a business or consult with a tax expert or accountant.

Interested in Learning More?

Schedule a free consultation with our team!

I’m a Blogger. How Do I Legally Operate a Giveaway or Contest on my Blog?

It’s common knowledge that running giveaways or contests on your blog will help drive traffic and attract new readers. It’s also a great way to network with other bloggers and cross promote. But if you currently run giveaways or contests on your blog, or are planning to - listen up.

You may or may not be aware, that regardless the size of your blog or giveaway, there are laws and requirements to running a fair and above board giveaway or contest; and that’s something that’s extremely important when it appears on your tax filing.

You might be wondering why this shows up on your tax filing at all. But many bloggers expense giveaways or contests and write them off come tax time. If a sponsor gifts you the prize that you’re going to pass on to your lucky winner, you can’t expense it. But if you’re paying for the prize yourself you can, along with the cost to ship it to the winner. (There’s more on deductions and expenses, but that’s for another blog post you can read here).

Here are a few guidelines for running your giveaway or contest*:

  • You cannot charge an entry fee to enter your promotion.
  • You absolutely must choose your winner at random.
  • You must accept all valid entries.
  • You must award a prize even if your prize sponsors backs out.
  • Any giveaway with a prize valuing $600 or more must be reported to the Internal Revenue Service. Bloggers should not only make entrants aware of the value of the prize but the fact that they will need to complete a prize validation as well as be responsible from any taxes that will result from winning.
  • Bloggers based in the United States cannot run a promotion involving any of the following industries: tobacco, alcohol, gasoline, dairy, insurance, and financial institutes. There are special requirements for these industries and the cost to meet the requirements usually won’t justify the time you spend on it.
  • You cannot extend an entry deadline in order to get more or any entries for the giveaway or contest.

To be sure you’re 100% in compliance with local laws, we recommend consulting with a legal expert. Good luck with the upcoming contest or giveaway – we’re sure it will be a smashing success!

Interested in Learning More?

Schedule a free consultation with our team!

One good thing about running your blog as a business is that you’re able to deduct expenses that are applicable to your profession. Any goods that you pay for, and that assist you in running your business, can be taken off the income you earn as a blogger.

Have a home office? You may be able to deduct some of your household expenses as well.

Your list of deductions should be included in your annual tax filing. You don’t actually have to send the IRS all of your pay stubs and receipts, but you’ll need to keep them on hand in case you’re audited. To simplify the process, all you’ll need is a spreadsheet with the date, amount, to whom, for what included for each item you want to deduct. We recommend entering your receipts at least monthly so you’re not stuck with a stack of receipts and an empty spreadsheet come tax time.

Here’s our top 20 when it comes to deductible expenses for bloggers:

  1. Hosting fees – if you’re still using a blogspot.com or wordpress.com account hosting fees don’t apply, but anything else, and you’re probably paying for your little piece of the internet.
  2. Domain name and registration fees – if you’ve got a .com or .net you’ll have an annual renewal fee.
  3. Internet access fees – monthly bills to have internet in your home? At least a portion of this counts towards a deduction for your business.
  4. Font, photo, or music downloads for your blog
  5. A portion of your computer, iPad, tablet, iPhone or cell phone
  6. That fancy new camera or even your point and shoot
  7. Software such as Photoshop or TurboTax
  8. Graphic or Web design fees – if you’ve recently updated the look of your site or rebranded your logo, this deduction applies for you.
  9. Purchasing ad space on other blogs – money spent marketing or promoting your blog on other sites, even if it’s just running an ad on a fellow blogger’s site. Make sure to keep the receipts!
  10. Self-sponsored giveaways on your blog (find out more about running a giveaway here)“self-sponsored” means you purchased the prize(s) and paid cash, not traded services.
  11. Giving away your services or products – non-profits, charities, or your child’s elementary school silent auction fundraiser all count. Make sure you invoice for your work – show the amount it was worth, but obviously the amount owed would be $0.
  12. SEO services – lots of bloggers pay for Search Engine Optimization services to increase hits on their site. This is a form of promotion/marketing – so it counts!
  13. Blogging conferences, E-book purchases, online class fees – if it’s helping you learn more about your blog or business it counts!
  14. Books, magazines, online subscriptions that relate to your blogging topic
  15. Transportation to that blog conference or a blogger meet-up
  16. Hotel charges – for blog conferences or blog-related business
  17. Office furniture – new desk, chair, lamp, etc.
  18. Business cards, marketing materials, file folders, Post-it notes, etc.
  19. Fees for professional licenses, etc.
  20. Meals during business travel, or coffee at that next blogger meet-up

If this all feels a little overwhelming, consider talking to a tax expert. Here at Mazuma we like to simplify the process for our clients and provide them with the right answer for any of their questions. And that stack of receipts and empty spreadsheet we mentioned earlier – we can take care of that too. Vyde clients simply upload their bank statements and their receipts and we take care of the rest.

To learn more about accounting for bloggers, visit these posts:

Accounting 101 for Bloggers

Taxes for Bloggers

Is My Blog a Business or a Hobby?

How Do I Legally Operate a Contest or Giveaway on My Blog?

3 Tips to Increase Blog Profits

How Do I Pay My Blog Employees?

Can I Pay My Family For Their Help?

Can I Deduct Conference Registration Fees, Travel, and Meals?

Can I Deduct Hosting, Web, and Design Fees?

As a blogger and small business owner you probably wear several hats every day. You’re a writer, photographer, marketing executive, and a myriad of other things. One of those hats is, or at least should be, bookkeeper and tax guy.

You have to know a little bit about everything. So here’s the skinny on taxes for bloggers. (We highly recommend seeking out an expert if you have questions – we’d love to talk about your taxes and become your resident tax guy if it’s a good fit for you!

Estimated Taxes

Due: Quarterly

Estimated taxes aren’t something most traditional employees have to worry about. If you were to look at your pay stub from your employer you’d see that some of your paycheck was being withheld to pay these taxes. The US tax system operates on a “pay-as-you-go” basis.  Where no money is being deducted from your blogging paycheck, you’re responsible to pay estimated taxes quarterly to the IRS.

If you don’t expect to earn at least $1,000 in blogging income, you may be able to avoid paying estimated taxes. But if you do, you’re expected to pay estimated taxes, due on: April 15, June 15, September 15, and January 15 (this is in the following year but applies to the fourth quarter or September 1 – December 31 of the prior tax year.)

Self-Employment Tax

Due: Annually

As far as the IRS is concerned, working as a blogger means you own your own business. Self-employment tax is the combined Social Security and Medicare taxes paid by an employee and an employer. If you look at that pay stub form your employer you’d see these withholdings itemized each paycheck. Since you’re both the employee and the employer, you get to pay both sides of the tax.

Deductible Expenses

Due: Annually

Good news! Because your blog is considered a business by the IRS, you’re able to deduct expenses that are considered necessary to your profession. Deductions typically can be made for just about anything that you use for your business – domain name and registration fees, blog design and logo creation, business cards, office supplies, a new computer or software that you use for your business, and so on.

Learn more about deductible expenses for bloggers and whether your blog is considered a business or a hobby.

To learn more about accounting for bloggers, visit these posts:

Accounting 101 for Bloggers

Top 20 Items Bloggers can Deduct on their Taxes

Is My Blog a Business or a Hobby?

How Do I Legally Operate a Contest or Giveaway on My Blog?

3 Tips to Increase Blog Profits

How Do I Pay My Blog Employees?

Can I Pay My Family For Their Help?

Can I Deduct Conference Registration Fees, Travel, and Meals?

Can I Deduct Hosting, Web, and Design Fees?

 

Best Benefits to Offer Employees

If your business has outgrown your garage and you’ve become more than a one-man band, well, congrats! But you may also be a little confused when it comes to hiring employees and exactly what to offer upon hiring. Choosing which benefits to offer employees is a critical and important task for small business owners. Speaking practically, and assuming you’re not yet offering free on-demand back massages like Google, or fancy scooters to ride around the office like Dropbox, let’s break down the most valued benefits for employees.

Many small business owners find it advantageous to look out for their employees first, and then their customers. After all, happy employees will look after customers which reduces demands on you and keeps your company growing. Thus, it only makes sense to offer as many benefits to employees as reasonably possible, without hurting your business.

Not surprisingly, some benefits are required by law. Plan on allowing your employees time off to vote, to serve on a jury, perform military service, and to have a baby or use FMLA (Family and Medical Leave). You must also comply with worker’s compensation, withhold taxes, and offer retirement and disability benefits. State and federal unemployment taxes are also mandated.

1. Health Insurance

The most sought-after and common benefit for employees is insurance. Unfortunately, as an employer, this is also the most expensive benefit to offer. The Affordable Care Act has changed the requirements for many businesses regarding health insurance and expanded coverage to a wider number of Americans. As of 2014, business owners with fewer than 50 employees are not required to provide a health coverage plan. However, those employees are still required to obtain health insurance whether it be a private plan or through your company.

If you have less than 50 employees and you do choose to offer health insurance, use the Small Business Health Options Program Marketplace (SHOP). Businesses that offer insurance through SHOP and have fewer than 25 employees may be eligible for certain tax credits. Businesses with more than 50 employees are required to offer health insurance.

While the decision is ultimately yours, providing healthcare for employees tells prospective and current employees that you care for their wellbeing. Healthy workers are happy workers, which translates to higher productivity, less stress, and less sick days.

2. Retirement and Life Insurance

Many businesses that begin hiring employees also like to offer 401k retirement plans, as well as life insurance. These are fairly inexpensive benefits to implement and are almost always taken advantage of by employees. These two benefits give employees a sense of security in their present position, as well as for their future.

3. Paid Leave

Most employers are surprised to learn that they are not required to give employees paid vacation, sick days, or holidays. While in the short term not offering these benefits can save you money, generous leave pay attracts high-quality employees and improves morale. Basically, if you choose not to offer any paid leave, you may find yourself without any employees to offer it to. The majority of employers offer some kind of paid leave to their employees.

If you choose to offer vacation pay, you’ll also need to determine a clear and thorough explanation of what is to be done with unused vacation time. Some employers choose to carry it over into the next year, some will pay it out in cash, and others abide by a “use it or lose it” policy. Find what works for you and make sure it is clearly outlined in your company handbook.

4. Health and Wellness Plans and Incentives

An increasingly popular perk employers are offering employees are wellness plans. These often come in the form of gym memberships, pool passes, memberships to various fitness classes, and the like. Many offer an incentive program for employees to set a fitness goal and receive compensation for meeting that goal within a certain time period. Some even join in the fun of offering prizes or money for an office weight loss program. Wellness benefits are a relatively inexpensive perk to offer to employees, and many are thrilled at the prospect of a little extra incentive to meet their existing goals.

Health and Wellness Plans and Incentives

5. Childcare Assistance

With a changing workforce and evolving family dynamics, more and more companies are assisting employees with childcare. Many offer child care referral services, and some even offer contracted daycare or in-office childcare.

Visit more posts in our Payroll 101 series:

What is Payroll?

The 1099-Misc Explained

Setting Your Own Salary as a Business Owner

The W-2 Explained

How Often Should You Pay Employees?

What are the Costs Associated with Payroll?

The Power of the Employee Pay Stub


In the infant stage of any business, your salary basically consists of what you earn in sales, minus your costs and taxes. Most businesses start out as a sole proprietorship with no employees and very little business overhead. However, as a company grows, many business owners choose to take on employees or enter a partnership, which ultimately complicates things when payday comes for a business owner.

So how do you “pay the boss” when the boss is you?

Because so much depends on how profitable your business is at the time (which often fluctuates throughout the year), there is no magic formula on setting your own salary. Financially savvy business owners may not see a lot of increase in their own bank accounts at first because they simply pay themselves what is left over after payroll, expenses, and operating costs. While their actual take-home pay may lack in the beginning stages, a successful business with strategic small business bookkeeping will grow over time and profits will increase.

 

When your business starts to show consistent profit from month to month, you should then be able to set a salary based on a percentage of those profits. Most businesses cannot predict their profits for the year ahead of time. However, after you have been in business for a few years, you can use those profits to review and make predictions about the future. Use your business costs, taxes, and planned investments to determine a reasonable salary for yourself. Most small business owners limit their salary to 50% of the profits.

If you depend on a set amount of money each month, you may choose to research the industry and set yourself a salary in accordance with those standards. The US Small Business Administration offers great comparison charts for salaries across all occupations and may be useful in helping you set a yearly salary and making adjustments over time.

successful business with strategic small business bookkeeping

As your business grows, surprisingly, setting or adjusting your own salary can become even more complicated. You’ll want to avoid overpaying yourself and raising red flags with the IRS, but you are also entitled to an increased salary as your profits increase. An accountant or financial consultant can help you determine a reasonable salary based on your company’s growth and financial circumstances.

While entrepreneurship is perhaps one of the greatest freedoms we have as Americans, it also requires a certain level of flexibility. When funds are low, your employees will still expect the same pay. It is you that will take the cut. However, as profits increase, the business owner will likely see the most advantage. If you keep your focus on the long-term growth of your business, having a paycheck that fluctuates depending on how the company is doing can have lasting advantages.

Visit more posts in our Payroll 101 series:

What is Payroll?

The 1099-Misc Explained

The W-2 Explained

How Often Should You Pay Employees?

What are the Costs Associated with Payroll?

5 of the Best Benefits to Offer Employees

The Power of the Employee Pay Stub

You just got a new job. Congrats! Pat yourself on the back and start filling out that mountain of new hire paperwork. Sign here, sign there, date a few places, and you’re ready to start. Most people don’t understand exactly what it is they’re filling out, or what exactly the documents mean that they receive from their employer until they need to understand them.

If you are hired as a regular hourly or salaried employee, you’ll receive a Form W-2 from your employer by January 31st of each year. If you’re self-employed or working as a contractor, you will receive a Form 1099 instead. Because of withholdings and insurance requirements, W-2s are really only useful for tax purposes. If any taxes (Social Security, Medicare, etc.) are withheld—and legally, they always should be—a W-2 will be issued.

You may not realize it, but in most cases, you cannot actually wait until April 15th to pay your entire tax bill. If you’re self-employed, you know this from your estimated quarterly tax payments. However, if you are an employee who receives a W-2, your employer is actually taking care of this for you, based on the information you provide on your W-4. When that magical day, April 15th comes along (and it always does), the numbers reported on your W-2 are subtracted from your tax bill. This helps you to determine whether you are owed a tax refund or if you need to make additional payments to the IRS.

The information on a W-2 is fairly straightforward. Let’s take a closer look at each of the boxes on your form.

Here’s a quick rundown of boxes on the left side of your W-2.

Box a: Your social security number. This information must be 100% accurate to properly file taxes with the IRS.

Box b: Your employer’s EIN. Basically, your employer’s EIN number is equivalent to your Social Security Number—it identifies their business individually. No two EINs are the same.

Box c: Your employer’s legal address. Whether or not that is the exact location you will be working does not matter so much as the legal address being the one reported on a W-2.

Box d: This box is for your employer’s payroll department. Sometimes this box is filled in; sometimes it is not.

Boxes e and f: This should contain your full name as it appears on your Social Security card. It also contains your mailing address. Again, whether or not you actually live in your tiny little PO Box is not as important as providing an address that you can receive mail. The USPS prefers that you do not use punctuation in your address.

If you notice that any of the above boxes are incorrect on your W-2, contact your employer immediately to make the changes. If the information on your W-2 is inaccurate or different from other information, the IRS will want to know why.

Now we’re getting to the good stuff. The boxes on the right side of your W-2 reflect information from your company, wages, and withholdings.

Box 1: This shows your total taxable wages, or, what you’ve earned before any withholdings have occurred. However, this number does not include elective contributions to retirement plans, pretax benefits, or payroll deductions like insurance. It’s not unusual for this number to be less than the amounts in boxes 2 and 3.

Box 2: This box reports the total amount of federal income taxes withheld from your pay during the entire year. This amount is determined by the information you provided on your form W-4 that indicates any exemptions and additional withholdings. You can adjust this number on your W-4 for next year if you feel that it is incorrect.

Box 3: This shows your total wages subject to Social Security tax. This number is figured before payroll deductions which means the amount could be either less or more than the number in box 1.

Box 4: Correlating with box 3, box 4 shows the total amount of Social Security taxes withheld for the entire year. Social Security taxes are calculated based on a flat rate of 6.2%. The maximum amount for Social Security withholdings in one year is $7049.40.

Box 5: This box indicates wages subject to Medicare taxes. Unlike Social Security wages, there is no cap for Medicare taxes and this is likely the largest number on your W-2.

Box 6: This shows the amount of Medicare taxes withheld for the year. Again, this is based on a flat rate of 1.45%. If an individual earns more than $200,000 in a year, regardless of filing status, they are taxed an additional .9%.

Box 7: This box represents tips reported to your employer. If you earned tips and didn’t report them to your employer, you still have to report them to the IRS.

Box 8: Allocated tips reported in this box are those that your employer attributed to you. This is considered income and is taxable.

Box 9: This box will be blank. There is no longer a reporting requirement for this box and it has not yet been removed from the form.

Box 10: This is where your employer reports any benefits paid on your behalf under a dependent care assistance program.

Box 11: This box is used to report amounts which have been distributed to you from your employer’s non-qualified deferred compensation plan. This is a taxable amount.

Box 12: Here you’ll find lots of codes that, to some, seem to be gibberish. Here’s a quick explanation of three of the most common codes you might see here:

  • Code D: Elective deferrals will general be include in boxes 3 and 5, even if they are excluded from wages in box 1.
  •  Code DD: This amount is not taxable, but it reportable to the Affordable Care Act. It is the cost of the employer-sponsored health coverage.
  •  Code P: This code is reported by your employer but not taxable to you. If reimbursments are non-qualified, they are reported as income in boxes 1, 3, and 5.

Box 13: This series of three boxes will be checked by your employer if your earnings are subject to Social Security and Medicare taxes but not federal income tax withholding. It will also be checked if you participated in a retirement plan during the year, or if you received sick pay under your employer’s third-party insurance.

Box 14: Your employers will report anything else here that doesn’t fall under any other categories on your W-2.

Box 15: This box includes your employers state and tax ID number.

Box 16: This box indicates the total amount of taxable wages for state tax purposes.

Box 17: If box 16 is filled in, box 17 will show the total amount of state income taxes withheld during the year.

Box 18: If you are subject to local, city, or other state income taxes, those will be reported here. You will need an additional W-2 form if your wages are subject to withholding in more than one state.

Box 19: The amount of withholding for box 18 will be reported in box 19.

Box 20: This box shows the name of the local, city, or state tax reported in box 19.

All W-2s should be received from your employer January 31st of each year. The IRS requires that a copy of your W-2 form is attached to your tax documents when filing your income taxes.

Visit more posts in our Payroll 101 series:

What is Payroll?

The 1099-Misc Explained

Setting Your Own Salary as a Business Owner

How Often Should You Pay Employees?

What are the Costs Associated with Payroll?

5 of the Best Benefits to Offer Employees

The Power of the Employee Pay Stub

In our last post, we demystified the elusive W-2 Form received from employers for wages earned on the job. However, non-employees who do contract work for a company will receive a Form 1099-Misc instead of a W-2.

Like the W-2, the 1099-Misc Form is an IRS form used for tax purposes only. This form reports miscellaneous payments to individuals for a calendar year. The IRS refers to 1099s as “information returns.”

The person or company who pays you to do the contract work is responsible for filling out the appropriate 1099 form and sending it to you by January 31st of each year. If you earned more than $600 from a person or company, you should receive a 1099-Misc.

When you prepare your income tax return for the year, you are required to report all income showing on the 1099 forms you received and pay income tax on these amounts. If you did work for a company or individual and did not receive a Form 1099-Misc from them, you are still required to report the income to the IRS as self-employment income.

1099 Forms are also issued for other reporting requirements such as: acquisition or abandonment of secured property, proceeds from broker and barter exchange transactions, cancellation of debt, changes in corporate control and capital structure, dividends and distributions, certain government payments, interest income, and other miscellaneous type of income. Each 1099 form will have a letter or series of letters after the “1099” that indicates which type of form is being reported. (Ex. 1099-A, 1099-DIV, 1099-K, 1099-Misc).

All non-employees should receive their Form 1099-Misc by January 31st, and an additional copy of the same 1099 is sent to the IRS by February 28th.

Visit more posts in our Payroll 101 series:

What is Payroll?

Setting Your Own Salary as a Business Owner

The W-2 Explained

How Often Should You Pay Employees?

What are the Costs Associated with Payroll?

5 of the Best Benefits to Offer Employees

The Power of the Employee Pay Stub

 

With electronic banking, direct deposits, pay with your phone options, virtual bookkeeping, and a decreasing need for anything made of paper, technology is changing nearly every aspect of the world. More and more employees are opting to have their paychecks directly deposited into their account and are using online banking to pay their bills. Their account numbers fluctuate tremendously between paydays, all without a piece of paper ever being passed through their hands. Gone are the days of a paper paycheck and pay stub being handed to you on your way out the door on Friday, and here to stay are the days of electronic everything.

It’s no surprise then that younger employees hardly glance at their pay stub, let alone understand what it means. However, the employee pay stub always has and always will provide a tremendous amount of valuable information.

Most pay stubs cover basically the same information, regardless of the company you work for. The pay stubs Vyde issues are no different.

IRS-looking terms

Here’s a quick rundown of all those big IRS-looking terms that show up on each and every pay stub:

Gross Pay is the total amount of money you earned before deductions are taken from your check. Usually, this number will not be the same number as the amount of your paycheck.

Net Pay is the amount of money you take home after Uncle Sam takes his cut, you’ve made your Social Security and Medicare contributions, and other withholdings are taken from your check. This will be the same amount that is deposited into your bank.

Social Security Taxes withheld contributes to your coverage for the Social Security system. After you have paid into the system for years and then retire, you are entitled to receive monthly payments. The Social Security rate is 6.20% for 2015. For example, if your gross is $1,000, $62 will be withheld for Social Security.

Medicare Taxes are similar to Social Security taxes and are mandatory. The rate of Medicare withholdings is 1.45%, and all employers contribute another 1.45% on behalf of the employee. When an employee becomes eligible for Social Security, they are also eligible for Medicare coverage for their medical expenses.

Federal Income Taxes are determined by the information you provided on your W-4 when you were first hired. This amount is what you owe to the Federal government when it is time to file income taxes and is taken incrementally from each paycheck.

State Income Taxes varies from state to state, and some employees are not required to pay state tax. This amount is also deducted from your paycheck in the same way Federal taxes are to cover the amount of taxes you owe to the state come tax season.

Leave Time includes vacation days, PTO (paid time off), or sick days. Most employers include how many hours have been used to date and how many hours remain for the year.

Insurance Deductions are taken from your paycheck depending on the type of health and/or life insurance your company offers. This deduction varies based on the type of plan the employee enrolled in upon hiring.

Retirement Contributions such as 401K or 403B show the amount contributed to either of these accounts.

Expense Reimbursements are included if the employee has used their own money for a company expense, or if they are being reimbursed for travel (gas, hotels, etc.)

Expense Reimbursements

You may also find these common abbreviations on your paystubs:

YTD: Year-to-Date

FT or FWT: Federal Tax Withheld

ST or SWT: State Tax Withheld

SS or SSWT: Social Security Tax Withheld

MST or Med: Medicare Tax Withheld

If you still have questions or if you’re confused about something on your pay stub, contact your Human Resources department for assistance. Understanding contributions, taxes, and withholdings listed on a pay stub contributes to good money management skills and financial independence.

Visit more posts in our Payroll 101 series:

What is Payroll?

The 1099-Misc Explained

Setting Your Own Salary as a Business Owner

The W-2 Explained

How Often Should You Pay Employees?

What are the Costs Associated with Payroll?

5 of the Best Benefits to Offer Employees

When it comes to hiring a new employee, there is a lot of work to be done before the training even begins. Employers have to post the job, screen applicants, conduct interviews, perform background checks and more, all before the employee is even hired.

After hiring an employee, there is even more work to be done. However, hiring a new employee doesn’t have to be as tedious as it sounds if you already have a new hire checklist in place.

Here are seven accounting tasks to add to your new hire checklist for an employee’s first day:
  1. Fill out an I-9. This proves your employee is eligible to work in the US. Find the official form, here.
  2. Fill out a W-4. This form ensures that the right amount of taxes is withheld from an employee’s paycheck, based on family size, insurance withholdings, and more. This form will then need to be sent to your company’s payroll department.
  3. Add the employee to your worker’s compensation plan.
  4. Have the employee fill out health insurance paperwork.
  5. If you offer a benefits package, the employee will need to fill out the necessary paperwork such as retirement, life insurance, wellness programs, etc.
  6. Put the employee on your payroll system and gather all necessary banking information.
  7. If your company offers direct deposit, get a void check with the necessary information to set that up.

Having a new hire checklist in place helps ease the process of starting an employee off on the right foot with your company. You will find that the checklist needs to be modified and changed over time, but streamlining this process and having the accounting paper ready to go can save time and hassle on an employee’s first day. When the process is perfected, you can delegate this task to another employee to take care of so you can start with the actual job training.