Payroll for New Optometry Practices: A Step-by-Step Guide

2026-08-21

Learn how to set up payroll for your new optometry practice: choose a system, classify staff, handle taxes, and avoid common pitfalls.

Starting a new optometry practice involves many moving parts, and payroll is one of the most critical. You need to pay your staff accurately and on time, withhold the right taxes, and stay compliant with federal and state regulations. This guide walks you through the essential steps to set up payroll for your practice, from choosing a system to running your first payroll. By the end, you’ll have a clear action plan to implement this week.

Step 1: Obtain Your Employer Identification Number (EIN)

Before you can run payroll, you need an Employer Identification Number (EIN) from the IRS. This is a unique nine-digit number that identifies your business for tax purposes. If you haven’t already, apply for an EIN online at IRS.gov. The process takes about 15 minutes and is free. You’ll need your practice’s legal name, address, and the name of the responsible party (usually you, the owner).

Step 2: Register with Your State’s Labor and Tax Agencies

Each state has its own requirements for payroll taxes, unemployment insurance, and new hire reporting. Visit your state’s department of revenue or labor website to register for:

State income tax withholding (if applicable)
State unemployment insurance (SUI) tax
New hire reporting (usually within 20 days of hiring)

Some states also have local taxes (e.g., city or county). Check with your local government to see if you need to register for those as well.

Step 3: Classify Your Workers Correctly

Misclassifying employees as independent contractors can lead to hefty penalties. For your optometry practice, you’ll likely have:

Optometrists: If they are W-2 employees, you must withhold taxes. If they are contractors, you don’t, but they must meet IRS criteria (e.g., control over their schedule, own equipment).
Opticians, technicians, front desk staff: These are almost always employees.
Contractors: For services like cleaning or IT, you may use independent contractors, but be careful with the IRS 20-factor test.

When in doubt, classify as an employee. The IRS and Department of Labor are cracking down on misclassification.

Step 4: Choose a Payroll System

You have three main options for processing payroll:

Manual processing: You calculate pay and taxes by hand. This is time-consuming and error-prone. Only viable if you have one or two employees and are comfortable with tax calculations.
Payroll software: Tools like Gusto, QuickBooks Payroll, or ADP Run. These automate calculations, tax filings, and direct deposits. Costs range from $40 to $100 per month plus a per-employee fee (typically $6 to $12 per employee per month).
Full-service payroll service: A company like Paychex or ADP handles everything, including tax filings and compliance. Costs range from $100 to $300 per month, depending on the number of employees and services.

For most new practices, payroll software is the sweet spot: affordable, accurate, and saves hours each month.

Comparison of Payroll Options

Option	Monthly Cost	Per-Employee Fee	Best For
Manual	$0	N/A	1-2 employees, tech-savvy owner
Gusto	$40-$80	$6-$12	Small practices, easy to use
QuickBooks Payroll	$50-$100	$5-$10	Practices already using QuickBooks
ADP Run	$60-$120	$8-$15	Growing practices, needs HR support
Paychex	$100-$200	$10-$15	Practices wanting full-service handling

Step 5: Set Up Payroll Schedule and Policies

Decide how often you’ll pay your staff: weekly, biweekly, or semimonthly. Biweekly is common in healthcare. Also set:

Payday: e.g., every other Friday.
Pay period: e.g., the two weeks ending the Saturday before payday.
Overtime policy: Optometry practices often have hourly staff (technicians, front desk). You must pay 1.5 times the regular rate for hours over 40 in a workweek.
Paid time off (PTO): Decide how you’ll accrue and track PTO (e.g., 10 days per year, accrued monthly).

Step 6: Collect Employee Information

For each employee, you need:

Form W-4: For federal income tax withholding.
State withholding form: If your state has income tax.
Form I-9: To verify employment eligibility.
Direct deposit information: Bank account and routing numbers.
Emergency contact and personal details: For your records.

Step 7: Run Your First Payroll

Once everything is set up, here’s how to run payroll:

Enter hours worked for hourly employees (or use a time clock system).
Review gross pay: Multiply hours by hourly rate, or use salary.
Calculate deductions: Federal income tax, Social Security (6.2% up to the wage base), Medicare (1.45%), state taxes, and any benefits (health insurance, retirement).
Subtract deductions to get net pay.
Submit payroll: Your software will handle direct deposits or you can print checks.
Pay taxes: Your software will schedule federal and state tax payments (usually via EFTPS).
File reports: Quarterly Form 941 and annual W-2s.

If you use a full-service provider, they do steps 3-7 for you.

Step 8: Stay Compliant with Ongoing Obligations

Payroll isn’t a one-time task. You must:

Pay payroll taxes on time: Federal taxes are due semiweekly or monthly, depending on your deposit schedule. State taxes vary.
File quarterly returns: Form 941 (federal) and state unemployment returns.
Provide pay stubs: Most states require itemized pay stubs showing gross pay, deductions, and net pay.
Keep records: For at least 4 years, keep payroll records, time cards, and tax filings.

Step 9: Avoid Common Pitfalls

Missing deadlines: Late tax deposits can result in penalties up to 10% of the unpaid tax.
Misclassifying employees: As noted, this can lead to back taxes and fines.
Not tracking overtime correctly: For hourly staff, ensure you’re paying overtime for any hours over 40.
Forgetting to update tax rates: Federal and state tax rates change annually. Payroll software updates automatically, but if manual, check IRS Publication 15 each year.
Ignoring state-specific rules: Some states have their own minimum wage, paid sick leave, or disability insurance. Check your state’s labor department.

FAQ

Q: How much does payroll software cost for a small optometry practice? A: Expect to pay $40 to $100 per month for software like Gusto or QuickBooks Payroll, plus $6 to $12 per employee per month. For a practice with 5 employees, that’s roughly $70 to $160 per month.

Q: Can I run payroll myself without software? A: Yes, but it’s risky. You must calculate federal and state taxes accurately, deposit them on time, and file quarterly returns. One mistake can trigger penalties. Software costs less than the time and risk.

Q: What if I hire an independent contractor optometrist? A: You don’t withhold taxes for contractors. You pay them the full invoice amount, and they handle their own taxes. However, ensure they meet IRS criteria for independent contractor status to avoid reclassification.

Q: When are payroll taxes due? A: Federal taxes (income, Social Security, Medicare) are due either semiweekly (every other Wednesday or Friday) or monthly, depending on your total tax liability. State taxes vary; check your state’s schedule. Your payroll software will remind you.

The Bottom Line

Setting up payroll for your new optometry practice is manageable if you follow these steps: get your EIN, register with your state, classify workers correctly, choose a payroll system, and run payroll consistently. Invest in payroll software to save time and reduce errors. Start by gathering your EIN and employee information this week, and you’ll be on track to pay your team accurately and stay compliant.