Payroll

[HDBT]

I am a hairstylist, and I am wondering if anyone uses square payroll to pay themselves? (it's only me in my salon, I have no employees)

I usually just transfer funds between accounts, but perhaps I would benefit from paying myself through payroll.

Because, I don't have direct deposit, I could get stuck with bank fees. But those fees are only $10 a month, and Squares payroll seems to be $30 a month. So perhaps I am better off with the possibility of having to pay a fee, it's cheaper. I just wonder if maybe using Square payroll, makes it easier to do your taxes? My husband and I use turbo tax. What can anyone share with me, plusses and minuses? Pros and cons? Ideas and or advice?

[alltiedupfloral]

I use square payroll for my small coffee shop. I have 2 employees plus myself. It is very easy to use, and they file taxes for you, as well as provide W-2's. It would likely cost you more, but would give you peace of mind on tax filing and end of year. My business files taxes as an S Corp which makes me an employee of the business as well as the owner- that is a key part in why I pay myself through Square. Having an accountant is helpful for this. 

[SquarzBakery]

As a sole proprietor, you're considered a pass through entity for taxes (unless you have a more complicated legal structure for your company), which means you do not receive a W2 for any money earned through your business. You do not want to use a traditional payroll service to pay yourself (but you will want to use it for future employees). Instead, you will file a Schedule C on your next individual tax return (1040) to indicate your taxes owed. Rather than using Square Payroll, you need to make sure to keep track of your revenue and business expenses in an accounting software package like Quickbooks. TurboTax and most other tax filing programs will import your info from your accounting software to help fill out your Schedule C on your tax return.

Make sure to set aside ~15% of your GROSS PROFIT (not revenue) each month or week or whatever works for you to cover at minimum FICA (Social Security & Medicate). You will owe at least this much in taxes.

After you file taxes next spring for the 2020 tax year, you will need to start filing Estimated Quarterly Tax payments. Your tax filing program will prompt you to create the documents for filing this form every quarter. Just mail the form in with a check every quarter in 2021 according to the schedule the tax accounting software gives you. However, if you anticipate earning significantly more or less in 2021 than you did in 2020, then you may need to modify the forms.

[HDBT]

Thanks! I’ve been in business for myself as sole proprietor for over 10 years. (Got most of the tax stuff figured out already) 

so thanks for the advice on that...

I was more wondering if it would be worth it for me to do square payroll for just myself. I needed a direct deposit to my 

bank account to avoid fees, and thought doing ‘payroll’ would get that for me. Plus take care of taxes for me... but at $30 a month, not sure it’s worth it. (And also my bank fees being $14, not worth it) from the sounds of your post you wouldn’t recommend it either.... just was a thought on my behalf.

[SquarzBakery]

Got it! Sorry for all the extraneous info 😝 You'll have to confirm with your bank, but most banks consider any ACH transfer from a business to a personal account as a 'Direct Deposit'. If you setup a regular reoccurring transfer, even if it's just $100 every two weeks, it should satisfy the direct deposit requirement for your free personal checking.

[diddings]

Depending on how you are incorporated be careful about how you pay yourself.  I'm an LLC so I simply make a draw from the company as I need to.  I use Quickbooks to pay my employees but not myself.   It's a mess at tax time if you do.    Talk to your accountant or any other tax advisor about all of this.  If you don't have an accountant think about getting one.  My thought is that I wouldn't cut my own hair.  Instead I go to someone like you.  I have a doctor for medical needs.  Why would I do buy own taxes?   I'd rather pay someone than use my own time to think about taxes.   Dan

[redraven]

I concur. My understanding was that as an LLC you don't pay yourself payroll. I was looking into this earlier this year when applying for PPP and SBA grants/loans and it seemed like if I was on payroll the whole thing would be much easier. Alas, my CPA told me I needed a different structure (like an s corp) if I wanted to be on payroll. Definitely be sure to talk to someone about tax structures before you start paying yourself like an employee as an LLC