When your small business starts growing exponentially, it can be challenging figuring out when to begin outsourcing your payroll duties to free up your time for other more important things. While every business is different, here are two signs you need to contract out your payroll responsibilities to another company.

Your Business Expands Into Other States

Expanding a business into other areas is great because it can open the doors to numerous opportunities. At the same time, operating in multiple states can be a major headache, especially when it comes to paying your employees.

That's because each state has its own rules governing how employees should be paid, particularly when it comes to amount of income tax that must be paid to the local, state, and federal government. Although you may be able to manage if you have employees in only one or two states, things can quickly dissolve into a confusing mess when you're operating in three or more areas.

If you don't want to risk getting in trouble with the IRS or causing tax problems for your employees, it's best to hire a payroll processing company to handle this task for you. These companies are well versed in local, state, and federal employment and tax laws and can ensure your business stays compliant regardless of where your offices may be located.

You Start Hiring Different Classes of Workers

Many new business owners are surprised to learn there are different types of workers, and each are treated differently by the government depending on their classification. The most well known are employees, which are people whose activities are directed by the company and are paid and hourly wage or salary. The other type are independent contractors who provide services to the company for a negotiated fee.

There are many differences between these groups, but the most important is that the company must pay taxes and FICA for employees whereas independent contractors are responsible for sending their own tax and Social Security payments to the government. Additionally, each group gets a different tax form at the end of the year and payments to each type of worker class must be accounted for in different areas when you file your own businesses taxes.

As you can imagine, things can turn into a real mess real fast when dealing with multiple worker class types. Thus, it's best to hand the whole job over to a payroll processing company who can help you keep things organized.

For more information about how a payroll processing company can help your business or to find out which services are best for you, contact a local provider like Paystar Payroll. 

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