Urgent payroll tips for the New Year
Whether you are creating payroll within QuickBooks or using another payroll service, the following information from Susan Gunn with Susan Gunn Solutions will be helpful to you as you financially guide your practice and your veterinary team through the next year.
Employees’ take home pay will be less in January. Make sure your employees understand that social security will now be deducted in its entirety from their paychecks. Because of this increase and the consistently tight economy, have new W-4s for each employee on hand. Most veterinary practices never revisit the W-4 after the employee is hired. However, life happens: kids, marriage, divorce, and death. These all affect an employee’s withholding allowances Remind your team that the higher number of exemptions they take, the less amount of tax is taken. Single with zero has the most amount of tax taken.
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 non-working spouse OR a dependent not claimed by anyone else.
The amount of deductions then increases by the number of dependents for whom you are responsible, simplistically speaking. A couple of things to keep in mind this coming year. We get used to having a certain amount for our take home pay. That will decrease because of taxes increasing—the higher the deductions, the less the taxes. But, if you take a higher amount just because the net pay is desired, then the result could be taxes owed at the end of the year, depending on the deductions allowed and taken.
The reverse is also true. It never ceases to amaze me at how many still claim zero, with the greatest amount of taxes taken. 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 and get a large monetary tax return in April. This could be an area to review and adjust. Use the tables on the W-4 to accurately decide the number of exemptions. Review the year-to-date payroll information 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.
Finally, set the stage for your employees. Most of them are aware of a Fiscal Cliff but may not realize the impact on their take home pay. The more they earn pay, the greater the impact will be on them. Be understanding and sympathetic. Also, beware that this is not the time to give emotional raises. Keep to your schedule of pay reviews. You and your veterinary practice will also have increased taxes this coming year, not just employees. It is time to tighten the belt and review expenses all the way around. I encourage you to discuss your best financial approach to the coming year with your practice management consultant as soon as possible.