If you own a small business, you probably want to take on as many responsibilities as possible to cut costs. Tackling payroll yourself is a great way to save money and resources.
However, this isn’t an easy job. You need to avoid mistakes to ensure employees remain happy and you don’t run into tax problems down the road.
Before starting, it helps to have a good understanding of the process and the right tools for the job. To help you out, we’re going over how to do payroll yourself and calculate employee taxes.
The Right Information
If you’ve recently started taking on employees, you’ll need to have everyone fill out a W-4. This form tracks an employee’s allowances and determines how much gets deducted from each paycheck. If your employees are having trouble, suggest this 2022 W4 calculator to assist them.
You’ll also need to get an employee identification number (EIN) if you don’t already have one. The IRS requires this of all businesses that pay out employees regularly.
Applying for an EIN is easy and fast. You can get the application on the IRS website and even complete the process online.
The Payroll Process
Processing payroll requires several steps. You’ll first need to gather each employees’ hours for a given pay period.
When a pay period comes to a close, you’ll need to calculate payouts based on hours and wages. Make sure you consider overtime pay, tips, or any other compensation included on an employee’s timesheet.
If you have more than ten employees, investing in time tracking software is a good idea. This will make calculating wages much easier.
There are a few ways you can pay employees each pay period. The method is up to you.
Cutting physical paychecks is one option. This requires more work but is fine for small operations.
You can also offer direct deposit to your employees. You’ll need to work with a vendor who can facilitate this service.
Even if you use direct deposit, you’ll still need to supply paystubs. If you don’t want to do this manually, click for more information about automating the process.
Calculating Employee Taxes
Every employee must have federal and local taxes taken out of their checks. These include income tax, Medicare, and social security.
You have to use the current tax rates to calculate the appropriate amounts. The IRS publishes a new tax table each year. You’ll need to reference this to determine how much you should deduct from each employee’s check.
If you live in a state that levies a tax on income, you’ll need to include this as well. You should be able to find a tax table on your state’s government website.
Keep in mind that there’s software available that can help with this process. If your business is growing, you’ll benefit from using these tools.
Master How to Do Payroll Yourself
As a small operation, you don’t need to spend money on an accountant to keep track of your payroll. Doing the job yourself will take some time to learn, but it’s totally doable.
Use the guide above as a roadmap when learning how to do payroll yourself and develop a system that works for you.
We hope this article has proven useful. Please check out the rest of our site for more articles on self-improvement and career advancement.