Here’s everything you need to know about setting up a payroll system so that you can easily do payroll right, the first time.
The IRS charges a failure-to-pay penalty of 0.5 percent of any tax balance per month of all the unpaid taxes until you settle the balance. However, the maximum charge due to failure to file tax returns is about 25 percent of the total accrual. Do you want to avoid getting in IRS’s bad books due to accusations of erroneous filing or non-payment of taxes?
You might start by doing better with your payroll. Learning how to do payroll can be a daunting task for first-timers. But with the right resources and tools, you can do your payroll with incredible ease.
How to Do Payroll?
Are you setting up your payroll for the first time? Here’s everything you need to know about payroll preparation in the comfort of your office.
Getting an EIN Is Your First Step
Preparing your payroll for the first time can be an overwhelming process without the right information. When setting up your payroll for the first time, your primary responsibility should be to get an EIN. Whether you are setting up your business for the first time or employing new employees in line with your expansion strategy, your business needs to have an Employer Identification Number.
The EIN is a unique nine-digit number that the IRS can use to identify your business. The need for identification is to ensure that your business is tax-compliant. The EIN is similar to the Social Security Number given to every American.
Consider a Local or State Business ID
Before you begin to file your payroll, consider all the local and state business ID requirements. This will be the first important step in your payroll preparation process. You might need to consider the underlying state and local regulations for the issuance of state and local business ID.
For any first-time business owner, this can be a tiresome, even annoying process. However, once you are done, you can proceed on with the PAYE preparation process with ease.
Proceed With Filling Information
Information is an essential component as you fill out PAYE for your teams. Whether you’re doing this for the first time or have recently employed new employees, consider all the details necessary to file your PAYE.
You’ll need your employees’ full names, specific start or termination dates, and their current address. You’ll also need other tax filing data, such as their social security numbers. Most employers also make the mistake of failing to include the necessary compensation details.
Know All the Official Forms Needed
Are you keen to do payroll correctly the first time? Setting up payroll requires that you also understand the critical official forms and their functions. Form W-4 is the primary form you must be sure to fill out. This form represents the Withholding Allowance Certificate.
You’ll need to work closely with your employees to ensure that you file the right tax returns. Your employees need to submit these forms annually as a measure to ensure the accurate remittance of withholding tax. This is especially so if they wish to update their allowance.
When setting up payroll, you also need to consider Form I-9. The form certifies that every employee in your company is eligible to work in the United States. The immigration officials may ask you to provide this form as often. It would be best if you kept the different Forms for each worker in a form I-9 folder.
Categorize Your Employees
If you’re wondering how to do payroll to ensure perfection in your first attempt, you need to consider classifying your staff. You also need to figure out who among your team should be an independent contractor and who should be a part-time employer.
The definition and classification of these two classes of employees keep changing. As such, this may affect the way you define and apply withholding tax for your staff. You might need to use form SS-8 to help you determine each worker’s status.
Misclassifying your employee’s details could potentially get you in trouble. You might also end up paying more if you classify your staff as full-time employees while they’re independent contractors.
Determine a Payment Period
When considering the payroll setup, it’s essential to settle for a payment period that favors you. In some states, you need to settle on a payment period that’s consistent with the State’s payroll calendar. You must then also set up payroll in a way that ensures you are comfortable with making the necessary payments when they fall due.
When setting up payroll it would also help to ensure that it’s in line with your employees’ needs. How well can you ensure that your designated payment period sorts their cash-flow issues?
Settle for a Payroll System
Preparing payroll can be one of the most dreaded periods in a company’s lifecycle. The pressure to do it right can cause unwarranted stress. As such, making a choice on whether to run your system on pad and pencil or through an online system is vital.
It would help to consider an option that will save you time while ensuring accuracy. Many online platforms exist that can help you with the payroll process from start to finish. However, it would help if you took your time to ensure that you only consider a highly reliable option.
Are you wondering how to go about setting up payroll? You can trust the paystub template for all your payroll related concerns. With this online solution, generating your employees’ pay stubs is faster and stress-free.
Your Payroll Setup Will Never Again Be a Perennial Pressure Point
For most business owners, knowing how to do payroll with perfection is always a hard nut to crack. This may be the reason for the many instances of fines and penalties by the IRS for failure to pay or file accurate returns. To avoid running into problems with the taxman, please follow the steps you just read in this article to make your payroll setup flawless.
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