Small Business Guide: Managing The Payroll Process By Yourself

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Before long, your new business will grow to the extent that you need to hire employees. At this point, you need to make the call about how to handle the payroll process. For starters, the last thing you need to worry about is finding the cash to pay for this service. The cost of a bookkeeper can set you back almost $46,000 per year.
The good news is that it's possible to manage your own payroll and it's not that difficult. Here's how it works.

Also read: Report Cash Income Without 1099 Form

1. Make It Official

Check out the legal requirements around the payroll process for your state.
Register for Employer Identification Numbers, get insured and sign up for workers' compensation. Next, choose your payroll schedule and make a note of the following important dates:

  • Pay dates for your employees
  • Due dates for tax payments
  • Tax filing deadlines

Don't forget the legalities around displaying the relevant posters on your premises. These usually have to do with Occupational Health and Safety and other important information.

2. Onboard Your Employees

Make sure each new employee fills out a W-4 form right away. This gives you time to calculate the correct deductions before payday. The W-4 helps keep track of their allowances and dependents. This, in turn, affects the amount of taxes to deduct from their paychecks. You need to file a hire report for each new employee as well.

Also read: What Are Pay Stub Deduction Codes?

3. Generate Paystubs

When payday rolls around, you can pay your workers via EFT or in cash. It is a good idea to give each of them a printed paystub too. Generating a pay stub can be tedious and confusing but it is an important part of the payroll process. Using a pay stub maker makes this chore a quick and easy one. You simply follow these steps.
The whole process takes about 2 minutes. Your calculations will be checked by a team of qualified accountants. Keep a careful record of all deductions and payments to employees as well as their paystubs. You will need it when tax time rolls around.

4. Final Steps In The Payroll Process

Taxes are one of those certainties in life. You can check the current deadlines for filing your business taxes on the efile website. As an employer, the two most important forms that you must submit are the W-2 Form and the 1099 Form. Both of these can also be generated online, so there's no need to panic. Simply enter all the information you have compiled regarding each pay date and off you go.
Again, it's quick and easy. When you've got all your facts and figures together, you can submit the information to the IRS. In addition to your annual tax obligations, Employer Federal Tax Returns are usually submitted quarterly. There may be additional tax requirements depending on the state you operate in.

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Frequently Asked Questions

Yes, there are several resources available, such as the IRS website, state tax agency websites, and publications from the Department of Labor. Additionally, seeking advice from an accountant or tax professional can be beneficial in managing the DIY payroll process.

Payroll records should be kept organized and secure, either in a physical filing system or digitally. You must maintain records of employee information, pay rates, hours worked, tax withholding, and benefits information. Most businesses are required to keep payroll records for at least three to four years.

To calculate payroll taxes, you need to determine the correct amount of federal, state, and local taxes to withhold from each employee's paycheck based on their tax filing status and allowances. You will also need to calculate Social Security and Medicare taxes.

You can pay your employees by issuing paper checks, direct deposit, or using a pay card. It's important to provide a pay stub with a detailed breakdown of their wages and deductions for each pay period.

The frequency of employee pay depends on your company's policy and state laws. Common pay frequencies are weekly, bi-weekly, semi-monthly, or monthly.

Businesses must deposit payroll taxes regularly, usually monthly or semi-weekly, depending on the size of the business. They also need to file payroll tax forms, such as Form 941, quarterly and Form W-2 and W-3 annually.

You will need to gather employee information, such as their full names, Social Security numbers, and current addresses. You will also need to know their salary or hourly wage, as well as their tax withholding information.

DIY payroll stands for "Do It Yourself" payroll, which means managing the payroll process for your small business without the assistance of a professional payroll service or software.

If you make an error in the payroll process, it's crucial to correct it as soon as possible. This may involve issuing an amended paycheck, adjusting tax withholding for the next pay period, or filing an amended tax return, depending on the nature of the error.

DIY payroll can be cost-effective for small businesses with a limited number of employees, and it allows business owners to have more control over their payroll process.
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Small Business Guide: Managing The Payroll Process By Yourself
Samantha Clark

A Warrington College of Business graduate, Samantha handles all client relations with our top-tier partners. Read More

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