ACCOUNTING 101: Payroll Ain’t Just a Paycheck

When the time comes around for processing payroll, it is not just “writing checks on Friday.” This ain’t Monopoly, so let us dive in on how to properly process payroll without losing your mind or the IRS’s respect. There is no getting away from uncle Sam. Running payroll in a business is a lot like running a relay race while holding a hot latte, a screaming baby, and a spreadsheet that may or may not crash at any moment. Aaahhhhhh!!! But don’t panic! With the right tools, knowledge, and a little business-savvy, you can process payroll like the responsible, profit-making boss you are. Laugh a little, learn a lot, and most importantly, avoid getting slapped with fines from the IRS and Karen from HR who still prints out her emails, F U Karen!

“With the right tools, knowledge, and a little business-savvy, you can process payroll like the responsible, profit-making boss you are.”

What Is Payroll, Really?

Payroll is the process of calculating and distributing employee compensation—wages, bonuses, withholdings, benefits, taxes… all of it. And yes, it’s as dramatic as it sounds. If you mess it up, it won’t just cost you money. It’ll cost you trust with your team and possibly a date with an auditor. And not a good date, one of those dates where you are hiding in the bathroom calling your best friend so she can call you to fake that there is an emergency.

Payroll process includes:

• Calculating gross wages (before taxes)

• Withholding taxes (federal, state, Social Security, Medicare)

• Deductions (benefits, retirement, health insurance)

• Paying your team on time

• Paying the government their cut on time (Uncle Sam always wants his money, honey)

• Reporting everything accurately in your books so they don't look like they were organized by a racoon with a caffeine addiction.

• Filing the right state and federal forms

Let’s Talk: 1099 vs. W-4 Employees

AKA: Are they your employee, or just vibing with you for a check? One of the first steps in payroll is knowing who you are actually paying—and how. This is where a lot of small business owners get tripped up. Don't be one of them.

• W-4 Employees (aka Traditional Employees)

  These are the folks who fill out a W-4 form, and you withhold taxes from their paychecks. As the employer, you also chip in on things like:

  • Social Security & Medicare (FICA)

  • Federal unemployment tax (FUTA)

  • State unemployment tax (SUTA)

  • Worker’s comp (depending on state)

  • Health benefits, 401(k), PTO, etc. (if you offer them)

  
  

  They’re on your team. You decide when they work, how they work, where they work. They’re basically part of the work-family—even if they never refill the printer paper and eat your gogurt even though it has your name on it.

  
  

• 1099 Contractors (aka Freelancers, Temps, "My cousin who does logos")

  They fill out a W-9, not a W-4. You don’t withhold taxes—they pay their own. You give them a 1099-NEC at the end of the year if you paid them $600 or more. These folks:

  • Choose how and when they work

  • Use their own tools

  • Often have multiple clients

  • Are not on your benefits or payroll taxes

  
  

  Misclassifying employees as contractors is a BIG no-no. If you treat someone like a full-time employee (control schedule, tools, training) but pay them like a 1099? You’re asking for IRS drama, back taxes, and potential lawsuits.

✅ Do This: Payroll Processing Done Right

1. Get an EIN (Employer Identification Number)

   This is your business’s Social Security number and it becomes very important when dealing with the IRS. Get this before anything else as you will need this to process payroll legally. No EIN = No payroll.

2. Classify Your Workers Correctly

   Employee or independent contractor? We already went thru this, don't mess this up. If you call someone a contractor and treat them like an employee (set schedule, give them a uniform, tell them how to do their job), the IRS will pop up like that ex when they see you thriving-fast, wild and ready to destroy your peace.

3. Choose a Payroll Schedule

   Weekly, biweekly, semimonthly—whatever fits your cash flow, team and legal requirements. This is something that you want to tailor specifically to your needs. (Florida, for example, doesn’t require a specific payday, but consistency is key.)

4. Keep Detailed Records

   Pay stubs, W-2s, W-4s, 1099s, I-9's, time sheets, direct deposit info, tax filings—all of it. Keep it organized for at least 3–4 years.

5. Use a Payroll System (Seriously, Don’t DIY This)

   Get software. Unless you enjoy calculating taxes with a calculator and regret. More on good payroll software below.

6. Pay and File Taxes On Time

   Don’t play with Uncle Sam’s money or say hello to penalties. Late = expensive. Depending on where you are, you will be required to file federal, state, and unemployment taxes on schedule. You will need to report to the IRS (941, 940 forms), state agencies, and possibly your city or county.

❌ Don’t Do This: Payroll Pitfalls to Avoid

1. Don’t miss payroll

   Paying your employees late is a one-way ticket to low morale, lawsuits, and viral TikToks titled “My Boss Don't Pay.”

2. Don’t guess on tax rates

   Use updated federal/state withholding tables or let payroll software calculate it for you. This is not the time for “close enough.”

3. Don’t forget to update pay rates and benefits

   Promoted someone? Changed insurance? Adjust that payroll, baby.

4. Don’t try to DIY payroll at scale

   If you’ve got more than 2–3 employees and you're still manually calculating payroll, you probably cry every Thursday. Automate it.

5. Don’t pay under the table

   This is not a mafia movie. It’s 2025. This will bring penalties and added expenses.

Payroll Varies By State (Because Why Would It Be Easy?)

Each state is “just a little different,” each one has its own rules, like the diva at the family reunion who brought her own snacks. I can't with you Karen.

Some key variations:

• State income tax: Varies by state. Florida for example, like Texas, doesn’t have one (yay!), but California will snatch a chunk of your check like it's a toll booth.

• Unemployment insurance rates: Varies wildly by state and how long you’ve been in business. Texas for example, rates vary by industry.

• Sick leave laws: Some states mandate paid leave like California, while others say “good luck!”

• Florida? Ah yes, let’s talk about the Sunshine State...

Payroll in Florida: Sunshine, Sand, and Simplicity (Kinda)

Florida is surprisingly chill when it comes to payroll laws. It is one of the easier states to manage payroll in. Here's why:

• No state income tax:

  That’s right. Zero. Zilch. Nada. You only withhold federal income tax, Social Security, Medicare, and unemployment (FUTA + SUTA).

• No state-mandated sick leave or paid time off laws:

  It is up to you to offer it and include it in your business policy.

• No specific payday laws:

  Just be consistent and transparent with your employees.

• Reemployment Tax (Florida’s version of unemployment insurance or aka SUTA):

  Businesses pay this tax, and the rate varies based on your industry and history of claims. You must register with the Florida Department of Revenue to file and pay this tax. And yes, you still have to file new hire reports and maintain records—even if your team works in flip-flops.

Payroll Tools That Keep You Sane and Make Life Easier:

Here are some payroll software options that are more dependable than your cousin Larry who swore he’d help with taxes and then disappeared. You don’t need to be a payroll ninja, you just need the right software::

1. Gusto

   1. Great for small to mid-sized businesses

   2. Handles W-2s, 1099s, tax filings, direct deposit, benefits

   3. Super user-friendly and clean interface that doesn't feel like 1997

2. QuickBooks Payroll

   1. Seamless if you already use QuickBooks for accounting

   2. Solid for integrations and automated reporting

   3. Real-time tracking and tax compliance

3. ADP Run

   1. Great for growing businesses with enterprise-level power

   2. Robust and scalable

   3. HR add-ons and full-service support

4. Square Payroll

   1. Ideal for hourly workers either in restaurants or retail

   2. Syncs beautifully with time tracking

   3. Instant payments

5. Paychex

   1. All-in-one payroll + HR + benefits

   2. Great if you want more support and don’t mind paying for it

6. Patriot Payroll

   1. Budget-friendly and made for small biz

   2. Simple, clear, and does the job without drama

Most of these will handle your tax filings, direct deposits, and year-end forms (W-2, 1099) with little effort on your part.

Reporting Payroll in Your Finances Like a Pro

Properly reporting payroll isn’t just for IRS fanboys. It helps you:

• Track labor costs (one of your biggest expenses)

• Know your true profit margins

• Budget accurately for growth

How to record it:

• On your Profit & Loss (P&L) statement, payroll is an Operating Expense

• Split it into categories like:

  • Wages and salaries – Your W-4 employee compensation

  • Payroll taxes – Your share of FICA, FUTA, SUTA

  • Benefits – Health insurance, retirement, perks

  • Contractor payments (if applicable) – Paid via 1099s (list separately!)

This not only helps you budget, but also gives you a crystal-clear view of how labor impacts your profits. If 60% of your revenue is going to payroll and you're still not profitable... Houston, we have a spreadsheet. Using an accounting software (QuickBooks, Xero, Wave), makes sure payroll integrates and auto-categorizes everything. Less human error = fewer IRS nightmares.

Will wrap this up by saying payroll might not be sexy or the flashiest part of your business—but it is definitely essential. Remember, payroll ain't just a paycheck. Done right, it builds trust with your team, keeps your books tight, and lets you sleep better at night. It is the heartbeat of your business. Done wrong, and you’re one W-2 away from a stress-induced eye twitch and a “chat” with the IRS.

So get that software, file those taxes, get those forms in order and pay your people on time. Because nothing says “I’m a legit business owner” like a squeaky-clean payroll system that doesn’t cause panic attacks on the 15th and 30th. Choose the right tools. Know the difference between a contractor and an employee. A happy team, a clean balance sheet, and zero IRS drama? That’s the real entrepreneur flex honeyyy so get that payroll done right. As always JNA is here to help, but in the meantime sending positive vibes your way 🙏

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