Around 24% of small business owners spend four hours or more doing payroll every week. If this is done incorrectly, they can leave businesses open to extra work or tax penalties. So how can they get it right every time?
With a few changes, payroll can become easier to maintain. Read on as we give our essential guide on how to do payroll.
Get Your Information Correct
Payroll for beginners starts with having the right information. An employer identification number gets provided when you set up with the IRS. Its purpose is to help them identify different businesses.
Applications for these numbers are free. You can get them online quickly and easily. The local state may also have certain tax obligations you are expected to perform as well, so check with them.
You then need the correct tax information from your employees. All of them must fill out a W-4 and I-9. Each form has different rules on how they should be submitted to the IRS.
Choose a Payroll Schedule
A small business payroll can be done in three timeframes. These are weekly, fortnightly, or monthly and each of these has advantages and disadvantages. Your state may have laws regarding how often people need to be paid so check with them.
Create Payroll Related Processes
You owe it to your workforce to track their hours accurately. If not, you will make more work later down the line and may report tax wrongly. This can lead to fines.
There are several ways you can do this. At a basic level, you can create physical employee sign-in sheets. Technological efforts can include a system for logging sign-on time for phones and laptops.
You will also need a method to track paid time off. This can include sick leave and holiday pay. If this seems like a tough task you may consider outsourcing to companies such as Innovative Employee Solutions.
Produce Your Payroll
Once you have a method of logging hours, it is time to start doing payroll. When you are paying by the hour take your hours worked and multiply the sum by the rate of pay. If you are giving workers a salary, this will not apply.
You will then need to make the necessary deductions for tax and any other employee benefits. This is the section where outsourcing the job or using payroll software becomes a major advantage.
There are certain records you must keep for tax purposes. You can store them physically or electronically. Keep them for employees currently in your workplace and for a certain period of time after their employment ceases.
Make sure you always have a backup of these records. Ensure you know all the dates you need to have submitted tax information and payroll by.
How to Do Payroll
Now you know how to do payroll, introduce these tips to your monthly routine. Don’t be afraid to outsource your jobs. It may also help to invest in software to assist you.
If you found this helpful, we have many more informative articles. From finance to marketing, we can help get your business off to a flying start.