It’s important to pay your employees and your taxes accurately, and in a timely manner. The rising popularity of payday loan services, and other forms of short-term lending, has added unnecessary strain to the debt burden of low to middle income workers. When paychecks are mishandled or delayed, the costs to employees can be significant. Though it may seem like a daunting task at first, it is possible for a small business to manage a payroll without spending a great deal of time or money.
There are a number of steps involved in the processing, paying and reporting of employee payroll. Assuming that your employees are considered regular for tax purposes, rather than independent contractors, you’ll prepare a paycheck for every employee. In preparing your employees check, you’ll first calculate that employee’s gross pay, based on his or her salary or hourly pay. You’ll then deduct an amount from this figure for federal income tax withholding, state tax withholding and social security/medicare (FICA). In some cases, you may also deduct agreed upon amounts from an employee’s paycheck for things like health insurance. After these deductions have been calculated, an amount equal to these deductions should be set aside and later used to fund required payroll deposits.
Payroll tax deposits will be remitted to the IRS on a bi-weekly or monthly basis, depending on the total amount of the payroll deposits to be made. The funds paid to the IRS will include all amounts withheld from your employees paychecks for federal and states income taxes, FICA (Social Security and Medicare), and an amount equivalent to the sum of employee FICA withholdings owed by the employer. These deposit payments can be made on IRS form 8109 or online through the EFTPS (Electronic Federal Tax Payment System). Records of your deductions and payments must also be reported to the IRS, using form 941, on a quarterly basis.
There are also additional employment related taxes that must be paid and reported on a regular basis, including federal unemployment taxes, as well as, various state and local taxes. If the prospect of managing the payroll on your own, while trying to run a successful business seems overwhelming, that’s because it can be. Whether you have a few employees or a few hundred, a reliable payroll processing solution is essential.
The first thing to consider when deciding on a payroll solution is how many employees you have and how many you plan to in the coming years. If you’re company has only a few employees, the most cost effective approach would be to self-manage your payroll, with the assistance of a payroll software solution. There’s a wide variety of payroll management software available, that can help you save both time and money over hiring a payroll management company. If, however, your business is too large or growing too fast to handle payroll yourself, there are also many online payroll services available that can handle your payroll without a huge price tag.