Urgent payroll information dental professionals need to know
During this tight economy, it is time to roll up your sleeves and figure out what you need to do to enhance your business understanding. Professional Advisor Susan Gunn explains what you need to know about the changes in W-4s, state unemployment rates, and payroll updates for 2013.
Whether you are creating payroll within QuickBooks or using another payroll service, as dental professionals you need to read the following information.
New W-4s. Net pay is less beginning January 2013. Please make sure the employees in your dental practice understand that their Social Security portion has now been raised 2%, thus reducing their take-home pay. Because of this increase and the consistently tight economy, I recommend getting new W-4s from each employee.
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Most practices never revisit the W-4 after employees are hired. However, life events happen — kids, marriage, divorce, death — and all of these affect the employee's withholding allowances.
Remind your employees that the higher the number of exemptions, the less amount of tax is taken. Single with zero has the largest amount of tax withheld. Allowances can be claimed as:
1 — If you are single and have one job and no one else claims you as a dependent
2 — You and your nonworking spouse OR a dependent are not claimed by anyone else
The amount of deductions then increases by the number of dependents for whom you are responsible, simplistically speaking.
There are a couple of things to keep in mind this year. We get used to having a certain amount for our take-home pay. That number will decrease because taxes are increasing. The higher the deductions, the less the taxes ... BUT if you take a higher amount just because you desire more net pay, then you may end up owing taxes at the end of the year, depending on the deductions allowed and taken.
The reverse is also true. It never ceases to amaze me how many still claim zero deductions, with the greatest amount of taxes withheld. If your employees have outside jobs for which they get 1099s and need the additional withholding taxes taken, then zero could be appropriate. However, most are using the government as a savings account, counting on a large monetary tax return in April. This may be an area to review and adjust.
Use the tables on the W-4 to accurately determine the number of exemptions to claim. Review the year-to-date payroll information in July 2013 to estimate if any taxes will be due by the year's end. During a difficult economic time is not the time to owe taxes.
To download new W-4s, click here.
New state unemployment rates. You should have received a new unemployment rate for 2013 from your state. Be sure you enter this information should you be using QuickBooks for payroll, or notify your outside payroll service of the change.
Lists > Payroll Item Lists > State Unemployment Tax type
Payroll updates. Be sure to download your payroll updates at the first of the year. Do not ignore the warning or your payroll taxes will be inaccurate.
Employees > Get Payroll Updates
If this is not done prior to the first 2013 payroll, worry. QuickBooks will automatically adjust the next payroll to collect the correct taxes. Keep in mind: This will then reduce the employee’s paycheck amount even more, so be sure to communicate this information.
Summary. Set the stage for your employees. Most people are aware of the "fiscal cliff" media bytes but may not realize what the impact is on their take-home pay. The more the pay, the greater the impact. Be understanding and sympathetic.
Also, beware. This is not the time to give "emotional" raises. Keep to your schedule of pay reviews. Your dental practice and you personally will also have increased taxes this coming year — not just your employees. It is time to tighten the belt and review expenses all the way around.
I encourage you to discuss your best financial approach for the coming year with your practice management consultant as soon as possible. If you need further assistance, I have two online courses:
- Managing Cash in a Cash-Strapped Society
- Year End: Before Handing Your QuickBooks to Your CPA
Most of all, do not let the doom and gloom economic news discourage you. It is simply the time to roll up your sleeves and figure out what you need to do to enhance your business understanding!
Susan Gunnhas more than 20 years of business automation experience, has written 25 books for professional practices, and has been an Advanced Certified QuickBooks Pro Advisor since Intuit® established the program. She is a Certified Fraud Examiner, a member of the Academy of Dental Management Consultants, and lives in Arlington, Texas. For more information, go to www.SusanGunnSolutions.com.