Want to learn how to do your own payroll? Brace yourself—you have a lot to learn as a business owner.
You need to study the tax requirements in your state extensively. Otherwise, you may get into trouble with the IRS. Note that they won’t accept ignorance as a valid reason.
But, don’t worry, payroll processing is doable. Many small businesses opt to do this themselves to save on costs. If you want to learn how to do it yourself, keep on reading.
1. Get the EIN Ready
First, you need your Employer Identification Number (EIN). If you don’t have one, you should request one from the IRS. The IRS uses this to identify your business.
2. Prepare the Tax Documents
All your employees should fill out a W-4 for the documentation of their withholding tax. They must also fill out an I-9 during their onboarding process. Make sure to fill out the second half, as well.
You’ll have to submit these documents to the IRS. You can’t learn how to process payroll without them.
3. Choose a Payroll Schedule
Then, choose when you want to pay your employees. It can be weekly, biweekly, semiweekly, or monthly.
When deciding, check your state’s laws. Some may require employers to pay hourly employees weekly.
4. Calculate the Employee’s Pay
This might be the hardest thing about learning how to do your own payroll. Still, it’s manageable for small businesses.
First, you need to calculate the gross pay. This is either the yearly salary or their hourly rate times the number of hours they worked without deductions.
Next comes net pay, which is what your employees will receive in actuality. This already has deductions, like taxes and copays.
On that note, you also have to calculate their taxes. You need to take into account any overtime, bonuses, paid time-off, and so on.
5. Pay Your Employees
Once you’re done with the calculations, you can then pay your employees using your chosen method. Send out pay stubs; we recommend this pay stub generator with logo.
6. File Taxes
The last step is to file and remit employment taxes. Refer to your deposit schedule and due dates.
Alternative: Use Payroll Software
If you’re willing to pay to make your job a little easier, you can use payroll programs. These cost money, but they’re relatively inexpensive, so they’re a great middle-ground between doing payroll yourself and paying an accountant.
Payroll software does all the calculations for you. It can even withhold, file, and remit taxes for you. Still, you remain in control of the payroll process.
Learn How to Do Your Own Payroll Better
Learning how to do your own payroll can be hard, but it’s a must if you want to save some money. It’s an important skill, as well, as every business owner must know how to keep track of the ins and outs of money, including salaries.
When learning how to do payroll, make sure to pay attention to every detail. You’ll get in serious trouble if you file incorrectly. You can check out our website to learn more.