Once you become an employer, you’ll be responsible for withholding and paying a variety of taxes on behalf of your workers. For example, you’ll have to withhold federal income tax, Social Security tax, and Medicare tax from your employees’ paychecks and periodically pay that money (along with your own contribution for the employee’s Social Security and Medicare) to the IRS. In most states, you’ll also have to withhold and periodically pay state income tax. A handful of states also require you to withhold and pay taxes for state-run disability insurance programs (and, in California, for paid leave to care for a sick family member). And you’ll have to generate end-of-the-year paperwork, such as IRS Form W-2, showing your workers how much they earned and how much they paid in taxes.
As you might imagine, it would be somewhat difficult to do all of this math yourself — and generate an itemized pay stub detailing all of the withholding for your employees. Fortunately, there are plenty of options for small business owners, including relatively inexpensive software and Web-based payroll services that do the work for you. A couple of the most highly recommended are the QuickBooks series (from Intuit), which offers a range of payroll options starting at just $17 a month, and Paycycle, an online payroll service that costs about $10 a month. Other payroll services are available from banks or other financial institutions or companies such as PayChex, but these services are generally more expensive. The advantage of using a QuickBooks product is that it can integrate with your Intuit accounting and tax software. Several software auction management programs will export data to Quickbooks, as well. Another good choice may be Microsoft Office Accounting which has extensive eBay integration.