Are you ready to process payroll for your employees?
If you’re a business owner, there’s a good chance that you’re going to handle payroll yourself, along with HR and benefits. That’s stressful because you need to know laws and regulations to pay your staff and pay your taxes.
If you pay the incorrect amount of taxes, your employees and the IRS won’t be happy. Find out the steps you need to know to run payroll for your business.
1. Find Your Employees’W-4 Forms
The first thing that you need to do is gather the W-4 forms your employees filled out when you hired them. The W-4 form lets you know how many allowances they have. The more allowances someone has, the fewer taxes get deducted. You may want to give your employees a chance to update their W-4 so they’re not surprised at tax time.
2. Get an Employer ID Number
You may have had to go through this step if you set up your business up as an LLC. Your employee ID number is a number that you get from the IRS. It’s like having a social security number for your business that the IRS uses for identity purposes.
Visit the IRS website to set one up. It only takes a few minutes.
3. Calculate Taxes
This is the most complex step to run payroll. You need to know how much in taxes you have to withhold from your employees’ checks.
This may include state, local, and federal taxes. The exact amount will depend on your location, the amount employees receive, and the allowances on their W-4. You can use the IRS withholding calculator to figure out federal withholdings.
There are two taxes always withheld: Medicare and Social Security. These percentages are 1.45% and 6.2%, respectively, up to the social security maximum of $8239.
4. Cut Checks or Direct Deposit
Depending on how you’re paying your employees, you may need to write your checks, print them, or send them as an ACH/direct deposit transaction.
5. Print Paystubs
With direct deposit, your employees don’t have a record of how much pay they receive and how much taxes were withheld.
You can use a site like https://www.thepaystubs.com/ which can print paystubs for you.
6. Pay Your Taxes
Now it’s your turn to pay your taxes. Usually once every quarter, you need to pay your share of taxes to the municipality, state, and IRS. This is where you pay half of the social security and Medicare for your employees.
7. Hand Out W-2 Forms
After the year ends, you have until January 31 to give your employees a W-2 form. This form is a compilation of the amount they made and the taxes withheld for the entire year.
It’s Not Hard to Run Payroll
Payroll is one of those necessary tasks that can take up a lot of time. When you run payroll the first time, it’s important to know how much taxes your employees are responsible for and how much you need to pay.
It will save a lot of headaches and time explaining things to the IRS later on.
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