I Wouldn’t Be Caught Dead Doing Payroll (or even paying someone to do it)
Posted in Outsourcing & Delegating
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Doing “payroll” is the mind-numbing process most businesses have to endure in order to pay their employees while still complying with the government’s mandates. It results in the numerical gobbledygook that employees see on the remaining half of their paystubs after they tear off their checks. When paying for hired help the traditional way, it’s not as simple as writing a check and handing it to them.
Instead, some poor unfortunate soul has to calculate figures and reduce the amount paid in each paycheck after withholding money for the following things:
1) Federal taxes — Most people have a portion of their yearly taxes paid to the IRS out of each paycheck, rather than being surprised with a huge bill at the end of the year. This is a more convenient way for taxpayers to pay, and the government receives its funding for $300 toilet seats even sooner. Everyone wins (if you consider the perpetuation of creeping socialism to be winning).
2) State taxes — See above, and replace “the IRS” with “[your state].”
3) Social Security — This is money that, instead of going to the person who earned it and who you would think is entitled to choose for themselves how to spend, save, or invest the fruits of their labors for their own well-being, is placed in a rapidly shrinking pool of money, where, hopefully, it will a) actually be available to them b) at the age they choose to retire, and c) distributed to them in the form of monthly passive income, at some fraction of what they could be receiving had they been able to invest it elsewhere at a decent rate of return all along.
The succes of this program is predicated, of course, upon the aviation of pigs over a snowy tundra in hell to the sound of the proverbial fat lady singing.
4) Unemployment Insurance — I don’t know what this is. I don’t even know if it’s withheld from paychecks. I just know it’s some kind of tax that businesses with employees have to pay. I don’t know this because I am exempt and I don’t care to learn.
5) FICA — Same as above. I have no employees and never will, so I don’t know what this is for and I don’t care. If this makes me less of an expert, so be it. I am clearly unfit to teach things that I do not recommend doing. All that I think any home-based business owner needs to know is that handling payroll is undesirable, and that there’s a way to avoid it. Learning how to do payroll is as effective a use of time for me as learning how to use the toilet in a space shuttle–not very high on the need-to-know scale.
So how do you legally avoid having to do payroll, or pay someone $100 per paycheck per employee to do it for you? Easy–don’t hire employees. Hire independent contractors. Write them a check and let them figure all that stuff out on their own. Then it’s THEIR problem, not yours.
The only catch is that if you call them independent contractors, you have to TREAT them like independent contractors, lest you taste the wrath of Uncle Same and his legion of dark suits. For this reason, I made sure that The Assistant Who Pays Their Own Salary has the same Independent Contractor Agreement I had to pay an attorney and CPA $1000 to hammer out, as well as the 20 factors the IRS uses to determine who really is an employee vs a contractor.
More on that topic to come, so stay tuned!
