Know the difference between contractors and employees.
A common error among business owners is confusing contractors and employees. It’s often tempting to classify workers as contractors, since it’s easier (you don’t need to worry about their payroll tax or benefits), but misclassifying workers can land you in trouble.
A basic rule of thumb is employees work in your core business, while contractors perform tasks outside your core business. So if you run a plumbing company, the guy who goes on house calls for you three days a week should be considered an employee, even if he’s not working for you full time. Your part-time webmaster, on the other hand, can be considered a contractor, since he/she works outside your main business.
Make sure your payroll budget includes payroll taxes as well as wages.
This is another important payroll tip that many business owners overlook. If your state requires you to pay payroll taxes, be sure to account for them in your budget. This will give you a realistic idea of your obligations and help you avoid unpleasant surprises.
Stay on top of federal and state tax deposits.
Missed or late payroll tax payments can lead to costly penalties, so be …