It’s no secret that doing your own payroll is stressful. Do just a bit of searching and you’ll find plenty of horror stories about small mistakes that end up costing a business big time.
However, if you fully understand the payroll process and you’re meticulous about getting things right, there’s no reason why you can’t do your own payroll. If you want to know how to process payroll manually, you’re in the right place.
When you’re trying to learn payroll processing, it’s important to keep things simple. Most payroll processing services us a system that they repeat over and over. Following these six simple steps each time will help you avoid mistakes.
Get a W-4 for Every Employee
Before they can get paid, every employee must complete an IRS form W-4. This documents their filing status and personal allowances.
A new Form W-4 has been released for 2020, so you’ll want to make sure you’re using the right form for any new hires.
Get (or Find) Your EIN
You’ll need a federal Employer Identification Number (EIN) to process your payroll. If you already have one, now is the time to find it. If not, you’ll need to apply for one.
You may also need a separate state EIN. Check your state’s employer resources to learn more.
Understand the Deadlines
One of the most important things you can do to avoid fines is to make sure you never miss a deadline. Mark your calendar with the following dates and do not miss them:
- Employee pay dates
- Tax payment due dates
- Tax filing deadlines
You’ll want to check the IRS website and your state’s resources for the correct dates. Consider using an electronic reminder so you don’t forget.
Calculate and Withhold Income Taxes
You’ll need to use an IRS withholding calculator to determine how much you need to withhold from each employee’s paycheck to cover state and federal taxes. Make sure you track both the employee and employer portions for each payroll period.
Pay the Taxes
On or before your tax filing due date, make sure you submit your payroll taxes. You may need to make federal, state, and local deposits. Most businesses do this on a monthly basis.
File Tax Forms and W2s
Lastly, make sure you send in your Employer Federal Tax Return and your state and local returns by the deadlines. You’ll also need to prepare your W-2 and annual filings at the end of each year.
Does this sound like too much for you? There’s no shame in hiring a payroll service! Outsourcing this critical task makes sense for many small business owners.
Take Control of Your Business Starting With the Payroll Process
Now that you’ve figured out the payroll process, you’re ready to either do it yourself or feel good about the decision to outsource.
We’ve got a lot more information to help you run your business like a pro. Take some time to browse through a few more of our blog posts!
Leave a Reply