Running a food truck is a business model that usually requires more than one person. As a food truck owner, it will become quickly evident that you cannot run your mobile business on your own. Because of this, you will need to hire employees to assist you in your day to day food truck operation.
Unless you have come up with a way of hiring staff members without having to pay them, there are a few things that you are going to have to be aware of to legally hire these individuals. Many of these steps are required even if you are going to be a one person show, while others will become a requirement as soon as you plan to expand your staff from 1.
9 Steps To Setting Up Your Food Truck Payroll System
Obtain an Employer Identification Number (EIN)
Before hiring employees, you need to get an employment identification number (EIN) from the IRS. The EIN is often referred to as an Employer Tax ID or as Form SS-4. An Employer Identification Number (EIN) is a nine-digit number that IRS assigns in the following format: XX-XXXXXXX. The EIN is necessary for reporting taxes and other documents to the IRS. In addition, the EIN is necessary when reporting information about your employees to state agencies. You can apply for an EIN online or contact the IRS directly.
Check Whether You Need State/Local IDs. Some state/local governments require businesses to obtain ID numbers in order to process taxes.
Independent Contractor or Employee – Know the Difference
Be clear on the distinction between an independent contractor and an employee. In legal terms, the line between the two is not always clear and it affects how you withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment taxes. As required by law, You will need to withhold payroll taxes from your employees checks, FICA (Social Security), SWH (State Withholding), FWH (Federal Withholding), SDI (State Disability Tax), Medicare, and FUTA (Unemployment Insurance Tax).
Take Care of Employee Paperwork
New employees must fill out Federal Income Tax Withholding Form W-4. Your employee must complete the form and return it to you so that you can withhold the correct federal income tax from their pay.
Set a Pay Period
You may already have a manual process for this, but setting up a pay-period (whether monthly or bi-monthly) is sometimes determined by state law with most favoring bi-monthly payments. The IRS also requires that you withhold income tax for that time period even if your employee does not work the full period.
Carefully Document Your Employee Compensation Terms
As you set up payroll for your food truck employees, you’ll also want to consider how you handle paid time off (not a legal requirement), how you track employee hours, if and how you pay overtime, and other business variables.
Don’t forget that other employee compensation and business deductibles such as health plan premiums and retirement contributions will also need to be deducted from employee paychecks and paid to the appropriate organizations.
Choosing a Payroll System
Payroll administration requires an acute attention to detail and accuracy, so it’s worth doing some research to understand your options. Start by asking fellow business owners which method they use and if they have any tips for setting up and administering payroll.
Typically, your options for managing payroll include in-house or outsourced options. However, regardless of the option you choose, you — as the employer — are responsible for reporting and paying of all payroll taxes.
Once you have all your forms and information collated, you can start running your food truck payroll. Depending on which food truck payroll system you choose, you’ll either enter it yourself or give the information to your accountant.
Federal and some state laws require that employers keep certain records for specified periods of time. For example, W-4 forms (on which employees indicate their tax withholding status) must be kept on file for all active employees and for three years after an employee is terminated. You also need to keep W-2s, copies of filed tax forms, and dates and amounts of all tax deposits.
Report Payroll Taxes
There are several food truck payroll tax reports that you are required to submit to the appropriate authorities on either a quarterly or annual basis. If you are in any way confused about your obligations, take a look at the IRS’s Employer’s Tax Guide, which provides some very clear guidance on all federal tax filing requirements. Visit your state tax agency for specific tax filing requirements for employers.
There are many payroll companies you can hire to do your taxes and file your reports. You can have your accountant do this for you or you can buy payroll software and do it yourself.
Please note that its always best to consult with your lawyer and/or account to help you get set up and to make sure you are in compliance with all laws and regulations.
If you have any additional tips to setting up a food truck payroll system, please feel free to share them in the comment section below.