Before hiring anyone, you need to understand your legal responsibilities as an employer. Failing to understand what your obligation is to your employees can land you in hot water.
Once you know the part you play, you can start learning about how to complete payroll processing yourself. It might seem complicated at first, but we are going to help you. Continue reading this article to learn the best way to take care of payroll for small businesses.
What You Need to Know
Before you can start doing payroll for small business, there are some important things you need to know and these include:
- Tax account numbers
- Tax rates
- How to calculate a paycheck and withholdings
- How to calculate FICA and federal income tax
- How to complete federal and state tax filings
Once you know these things, it's time to get started.
Choosing Payroll Options
Each pay period, you will need to create pay stubs. Pay stubs allow your employees to see how much money they made and what withholdings are coming out of their check.
Beyond that, you need to decide if you're going to take care of payroll by hand or with payroll software. While doing payroll by hand may give you the most control, it can be very time-consuming.
Whatever option you choose, you'll need to fill out an I-9 form to verify your employee's legal status. Your employees also need to fill out a W-4, so they can get taxes taken out of their paycheck.
Paying Your Employees
Now you're ready to pay your employees. Your company may offer a physical check option or you might offer direct deposit. Most employees like to opt for a direct deposit since it is easier for most people.
Let employees know the pay schedule. You might pay them every week, bi-weekly, bi-monthly, or monthly. Make sure you choose something that will work for both you and your employees.
Now you have to calculate and withhold income taxes and pay those taxes.
In most cases, you'll also need to file tax forms and employee W-2s each quarter as well as at the end of the year.
Keep in mind that depending on where your business is located, there may be other responsibilities you have as an employer.
Is Doing Your Own Payroll Right for You?
If you're feeling overwhelmed with all the steps to doing your own payroll, you might opt to outsource your payroll or to hire an accountant. While doing your own payroll might be less expensive initially, it could cost you money in fees and penalties if you accidentally calculate something wrong or file incorrectly.
Learning How to Complete Payroll Processing
Now you understand how to complete payroll processing. We've kept it as simple as possible, so you can get started on it right away.
Do you want to learn more about small business issues? Keep reading our blog to get the information you need.