As a small business owner, you face tons of financial situations, all with different accounting and documentation requirements. When the first unusual situation crops up, the last thing you want is to be caught unaware. Here’s a quick guide on how to handle some of the more common of the uncommon issues that can affect your business.
What to Do With Abandoned Payroll Checks
Escheat Laws (laws regarding lost or abandoned property) also cover payroll checks. After all, whether or not employees pick up their checks, they are still owed the money for their labor. When you get a payroll check back in the mail or an employee never picks up a final check, you cannot simply hang on to the physical check forever. Instead, each state has regulations about how long you must hold the check before remitting it to the appropriate state agency. The hold time can range from 1–7 years. So make sure you have a file ready for those missed checks and watch the dates to ensure timely remittance.
Tracking Vendor Payments
When you cut a check to a vendor, you might need to collect some extra information. If the supplier is operating a personally owned business or acting as a consultant, you need to file a 1099-MISC at the end of the year. For any vendor payments, you need to match invoices to document the outgoing funds. These recording requirements are necessary for your end-of-year business tax filing.
Reporting New Hires
Whenever you onboard a new employee, you must also notify the appropriate agencies. The State Directory of New Hires (SDNH) notifies federal agencies of the change in employment status and works with agencies like child support enforcement to maintain current records. When you send your new hire report, you need to include at least seven basic pieces of data:
- Employer Name
- Employer Address
- Federal Employer Identification Number (FEIN)
- Employee Name
- Employee Address
- Employee SSN
- Date of Hire
Individual states may have more stringent reporting requirements, but this is the federal minimum required for all new hires and rehires.
As a small business owner, you are likely to face these issues on occasion. When you do, it’s important to know how to handle them, particularly situations like vendor payments and onboarding, which are a common occurrence.