Knowing how to do payroll is crucial for any business, especially a business that is not very big. Even if you have a few numbers of employees, payroll is a must. That also goes for saying that payroll for one employee is as vital as for several others in any organization. Let us find out a few important aspects related to payroll in this write-up
How To Do Payroll Yourself?
Addressing intricate details with precision is the most crucial. For instance, if you happen to enter the payroll taxes or the deductions incorrectly, your business might get exposed to liabilities that can be severe and debilitating for your business. If you want to process the payroll manually, check out these steps.
You may not find doing the payroll yourself come as easy as you fathomed. If you are doing it for the first time, it sure does make sense to talk to a professional. However, if you already have an idea about how it works, these steps can help you to glide through the entire process.
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Find the Employer’s Identification Number
The first step in doing payroll manually is to set up an EIN with Internal Revenue Service (IRS). This number is unique and issued by the IRS so that it can identify your business. If your business is new, you must apply for EIN and they prefer that you do so online. Applying is free of cost. Also, get the tax ID numbers for which you must check out with the local or state county.
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Employee Tax Information must be Collected
Once you have the EIN and you have collected the relevant tax information of the employees, ensure that all employees fill in a W-4 and I-9. For freelance and contract workers, the 1099s must be collected. The payroll forms which are filled out by the employees provide information related to their legal work status and other related information that is required for payroll processing.
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Plan a Payroll Schedule
Simple payroll it may seem but the above forms must be filled as there are laws that will have the required dates for submission. The norms related to freelancers or contract workers are different than the full-time employees.
There are four types of payroll as we know. Weekly, Bi-weekly, monthly, and semi-weekly. Consider all aspects about how to do payroll for your employees and which schedule will work best for you. every schedule will have its advantages and drawbacks.
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Calculating the Gross Pay
For calculating the gross pay, you must multiply the total number of hours an employee has put in on an hourly basis within a given period. For this purpose, the spreadsheet is the best bet if you want to know how to run payroll. After you obtain the total hours the employee has worked for a pay period, multiple it with the hourly rate.
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Calculate Deduction, Withholdings, and Allowances
This is perhaps the most crucial of all steps in which you must find out the employees’ deductions and allowances. Consider the following for the same.
- State taxes
- Federal taxes
- Social security
- Medicare
- 401(k) contributions
- Additional benefits
- Workers’ contribution
Remember this step might take a lot of time because you have to calculate the deduction and the allowances depending on the category of the employees to which they belong, which differs from one category to another.
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Calculate net pay and make payment to employees
Once you have matched and tallied the deductions and allowances and calculations, subtract the amount that is being withheld from each employee which will give you the net pay of the employees.
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Maintain records
It is important to keep an account of every calculation that you carry out for payroll. You might need it in the future should any despite arise. You can fix the error right away
Why do you need a payroll system?
Regardless of whether you are using a manual system or a cloud-based system, the payroll system is required so that you can keep a tab on the employee hours and understand all the aspects of payment before you make payments to the employees. These might include deductions, allowances, withheld amount if any, and so on.
However, doing it manually can put a lot of strain on you. you can always seek the assistance of a professional or use cloud-based software applications that will ensure that your business payroll process is streamlined and takes less time and resources.
