A Guide to Managing Payrolls Yourself for Your Small Business
You don’t need to be a mathematical genius if you’re looking to do payrolls yourself for your small business. It might seem like a huge number crunching task and the calculations might make fret it. But you don’t need to worry as long as you thoroughly get an understanding of the overall process.
Managing payroll includes a number of tasks like paying your tax agencies, employees, and other applicable entities. While many small business owners are well aware of their products and services, not all of them are capable enough to take on the payroll task, especially in these times of automation. Such businesses then seek contact center workforce management services to streamline and make the process efficient.
Apply for an Employer Identification Number
To start off, think around the lines of applying for an employer identification number as it is the equivalent of a social security number for your business. To identify your business for tax purposes, this nine-digit number is used by the Internal Revenue Service and the government. Applying for an EIN is free and pretty simple as you can fill in the online application on the IRS website and receive it in minutes.
Collect Employees’ Tax Information
To withhold the right amount of taxes from your employee’s pay is your responsibility as an employer. This can only be possible after you collect your employees’ tax information by making them fill out form W-4. This form gives you information on the employees’ tax-filing status.
This form includes the employees’ marital status, income, number of jobs the employee’s spouse has, number of dependents, and other factors. Furthermore, the form also includes tax calculation tables showing withheld taxes, filing status, and income. These forms are necessary as payrolls cannot be processed without the details provided in them.
Set a Payroll Schedule
After obtaining all the relevant tax information from your employees you can set up a payroll schedule. You can choose from four types of payment schedules, namely, biweekly, weekly, semiweekly, and monthly. There are advantages associated with all four methods but it is essential that you choose one according to your business and cash flow. Moreover, when figuring out your pay schedules, make sure to add payroll expenses like direct deposit and postage fees. Furthermore, when deciding your schedule, it is essential that you take into consideration your state’s paycheck requirements as well.
Calculate Gross Wages
It is crucial that you pay special attention to paying your employees the right amount they deserve. Employees usually submit time cards or clock their hours through time tracking systems. Hence, you can easily convert the minutes into wages for their payrolls. You basically decide how much salary you need to pay each employee based on benefits, deductions, and withheld taxes.
Apart from this, if you plan on giving your employees a bonus, you should calculate it through a separate bonus tax calculator instead of a regular salary paycheck calculator. For this, you need to have the employees’ gross wages year-to-date. Furthermore, take into consideration any sick leave, holidays, paid time off, and discretionary time off.
Determine Taxes and Other Withholding Amounts
When processing payrolls it is important that you determine the deductions and allowances of each employee. These exemptions are the money taken out of a paycheck during a year. Moreover, the deductions and allowances are made on the basis of state taxes, federal taxes, medical care, social security, local taxes, worker’s compensation contribution, 401(K) contributions, and other benefits.
Distribute Paychecks
Upon determining an employee’s final wage after making necessary deductions, you can move on to distributing the paychecks. But since there are different means through which you can make this transaction, you need to choose the one most suitable for your company.
Direct Deposit
Being one of the most popular and widely used forms of payment today, direct deposit is more secure and ensures timely fund transfers to employees’ bank accounts. It is far safer in comparison to handing out cash or checks. You can set up automatic payments by scheduling them with your bank.
Other Payment Options
Not all of your employees would prefer direct deposits or have bank accounts, to begin with. Additionally, some states require you to offer two payment options to your employees. Whatever the case it is ideal if you let your employees choose from multiple paycheck options. Therefore, apart from direct deposit, you can offer them checks including mailed checks, cash apps, payroll cards, and cash.
Conclusion
Processing paychecks might not be as complicated as it seems. If you follow the few necessary legal steps, you can become a successful payroll manager and run the operation for your own small business.