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Being a new business owner is a lot of work, and one thing you’ll have to do is set up payroll for your employees.
Starting a new business is a major life venture that brings with it a smorgasbord of new tasks to take on. If you’re brand new to running a business, you’ll have to familiarize yourself with these in order to keep things running smoothly. One of the many tasks now on your plate will be managing payroll for your employees. We have previously discussed the first steps that need to be taken to do this task effectively. Now, we’ll go over final steps to ensure that your payroll management is functional and streamlined.
Collect Employee Information
To run payroll, you’ll need specific information from your employees. Make sure they complete the following forms when they’re hired:
- Form W-4: This form tells you how much federal income tax to withhold from an employee’s wages based on their filing status and exemptions.
- State Tax Withholding Forms: If applicable, employees may also need to fill out a state tax withholding form, which serves the same purpose as the W-4 but for state taxes.
- Direct Deposit Information: If you offer direct deposit, gather the necessary banking information from your employees.
Additionally, ensure that your employees complete Form I-9 to verify their eligibility to work in the U.S. You’ll need to keep copies of these forms for your records.
Calculate Payroll Taxes and Withholdings
When you run payroll, you’ll need to withhold certain taxes from your employees’ wages and contribute additional employer taxes. This includes:
- Federal income tax: Based on the W-4 forms your employees submit.
- State and local income taxes: If applicable.
- Social Security and Medicare taxes (FICA): You’ll withhold a portion from employee wages and contribute a matching amount as an employer.
- Federal unemployment tax (FUTA): You, as the employer, are responsible for paying this tax.
Payroll software typically calculates these withholdings automatically, but if you’re handling it manually, make sure you stay up to date with the tax rates and requirements.
File Payroll Taxes and W-2s
Payroll doesn’t end when you’ve paid your employees. As an employer, you’re required to regularly report and deposit payroll taxes. You’ll need to file federal and state payroll tax returns, and report Social Security, Medicare, and income tax withholdings. Filing schedules depend on your business and can range from monthly to quarterly.
At the end of the year, you’ll also need to file Form W-2 for each employee. This form shows the total wages earned, taxes withheld, and other payroll-related information. You must send copies of W-2s to both the IRS and your employees by January 31st.
Stay Compliant with Record-Keeping Requirements
Payroll isn’t just about paying your employees and filing taxes; it also involves keeping accurate records. The FLSA requires employers to maintain payroll records for at least three years. You’ll need to keep documents such as time cards, wage rates, and proof of tax filings.
Having a solid record-keeping system in place is vital for avoiding penalties, staying compliant, and handling potential audits.
Trust the Professionals at the Harding Group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients.
Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning? We have the necessary expertise and years of proven results to help.
We gladly serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of tax time, contact us online or give us a call at (410) 573-9991 for a free consultation. Follow us on Facebook, Twitter, YouTube, and LinkedIn for more tax tips.