Growing Your Business? Here's What You Need to Know About Small Business Payroll Taxes

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You’ve decided 2025 is your year. 

You’re growing your business, hiring employees, and really becoming a CEO.

And while that’s exciting, it also means more tax obligations. (What’s that saying, “with great power comes great responsibility?”) And I'm here to make sure you don't learn about these changes the hard way (aka: through an IRS notice).

The Evolution of Your Business = The Evolution of Your Tax Obligations

Remember when business taxes were just you filing a Schedule C with your personal return? Those were simpler days! But as your business grows, so do your responsibilities with Uncle Sam.

Let's break down what happens at each stage:

Stage 1: Adding Yourself to Payroll (S-Corp Owners)

So you've decided to level up to an S-Corp to save on taxes? Smart move! But here's what nobody tells you right away – you MUST run payroll for yourself. Yep, even if you're the only person getting paid. Here's what that means:

• You need to set yourself up as an employee

• You have to pay yourself a "reasonable salary" (and the IRS actually cares about this)

• You're now responsible for payroll taxes on your salary (social security, Medicare, state unemployment…) 

Stage 2: Hiring Your First Employee

This is a huge milestone! Here's what gets added to your plate:

1. Federal Payroll Taxes:

• Social Security (6.2% from employee, 6.2% from you)

• Medicare (1.45% from employee, 1.45% from you)

• Federal Income Tax Withholding

• Federal Unemployment Tax (this one's all on you)

2. State Obligations:

• State Income Tax Withholding (if applicable)

• State Unemployment Insurance

• Workers' Compensation Insurance

Stage 3: Growing Your Team

As you add more employees, the dollar amounts change, and so might your deposit schedules. Your obligations now include:

• More frequent tax deposits (possibly semi-weekly instead of monthly)

• Potential additional state registrations if hiring in new states

• More complex reporting requirements

• Higher stakes for accuracy and timing
  

The Forms That Come With Growth For Small Business Payroll

With each stage, you're looking at these required filings:

1. Quarterly Forms:

• Form 941 (Reports wages and tax withholdings)

• State unemployment insurance reports

• State withholding reports

2. Annual Forms:

• Form 940 (Federal unemployment tax)

• W-2s for every employee

• State annual reconciliation forms

Why "Figuring It Out Later" Is Not a Growth Strategy

Here's the thing – I've seen too many business owners get caught up in the excitement of growth (as they should!) but push these tax obligations to the back burner. 

Then comes the panic when they realize:

• Payroll tax deposits have specific due dates (and harsh penalties for missing them)

• The IRS can hold you personally liable for unpaid payroll taxes

• Playing catch-up with payroll compliance is expensive and stressful

• Mistakes can trigger audits of your whole business

The Solution That Grows With You

Here’s the thing. I LOVE DIY strategies…when they make sense. But if there is ONE THING that I recommend you don’t DIY it’s payroll. The government takes this very seriously and you owe it to your team to do things properly.

This is exactly why I recommend GUSTO to my clients. It's like having a payroll department that scales with your business, handling:

1. For Solo S-Corp Owners:

• Setting up proper payroll for yourself

• Managing your personal payroll taxes

• Filing all required forms

2. For First-Time Employers:

• New hire reporting

• Tax registration assistance

• Automated payroll tax calculations and deposits

3. For Growing Teams:

• Multi-state payroll

• Different pay schedules

• Benefits administration

• Time tracking

How to Set Yourself Up for Small Business Payroll Success

1. Plan Ahead:

• Get your EIN if you don't have one

• Register for state tax accounts

• Set up a separate payroll bank account

2. Choose Your Systems:

• Sign up with GUSTO (yes, that's my affiliate link – I recommend them because it’s who I and all my clients use because they make this whole process actually manageable)

• Set up your payroll schedule

• Get your tax deposit schedule straight

3. Stay Compliant:

• Keep your payroll records organized

• Stay on top of tax rate changes

• Monitor your cash flow for tax deposits

The Bottom Line

Growing your business is exciting, and these new tax obligations are actually a sign you're leveling up! But they're also serious business. Getting them right from the start will save you so much stress (and money) down the road.

Ready to set up your payroll the right way?

1. Get started with GUSTO to handle all these moving parts

2. Apply to work with me for a comprehensive growth strategy that includes proper tax planning

Disclaimer: While this guide provides valuable insights, it's important to note that every business has unique circumstances. For personalized advice tailored to your specific situation, please consult with a qualified tax professional. Our goal at CBFS is to empower you to make informed decisions that support your business growth and personal wealth-building objectives.

Get A Financial

Headstart

Check out the CBFS shop to find resources to support your business journey & make your finances a breeze.

SHOP HERE

More Tax Resources For Small Business Owners:

1. 1099s For Small Business Owners

2. Estimated Tax Payments For Small Business: How To Calculate Your Quarterly Payments

3. Year-End Tax Planning: The Ultimate Checklist For Badass Small Business Owners

Need More Help?

If you want personalized guidance on setting up your business finances, apply to work with me here. Let's make sure your business starts off on the right financial foot!

Disclaimer: While this guide provides valuable insights, it's important to note that every business has unique circumstances. For personalized advice tailored to your specific situation, please consult with a qualified tax professional. Our goal at CBFS is to empower you to make informed decisions that support your business growth and personal wealth-building objectives.

Disclaimer: Some of the links in this post may contain affiliate links that will provide compensation. 

Disclaimer: AI may have been used to help create, enhance, or review this content. All relevant financial information has been reviewed by a licensed financial professional.

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