4 Payroll Questions Every Business Owner Needs Answered
Payroll is a vital part of your business operation, and one of the most complicated. Careful calculation is needed to prevent frustrated employees, inadequate or excess pay, or even regulatory trouble. Business owners often have questions about payroll, and this guide is designed to provide answers to some of the most frequent ones that come up.
What Are the Basics?
Your first payroll question, like many business owners (especially new ones), is likely “what are the basics of payroll?” To start, payroll is the process you use to record your employees’ time and pay their salaries and wages. Before you start calculating pay, there are some preparations to make. While some of these steps are one-time tasks, others you may have to do over when you hire new employees:
- Get an employer ID number from the IRS.
- Establish your state and (if applicable) local tax IDs.
- Collect your employees’ tax and financial information, including their W-4s.
- Set up a payroll schedule.
With all this taken care of, the basic method of processing payroll is as follows:
- Review your employees’ hourly schedules.
- Determine overtime pay.
- Calculate gross pay.
- Determine deductions.
- Calculate taxes.
- Calculate net pay.
- Issue pay via the preferred method (written check, direct deposit, etc.)
What Are Common Payroll Mistakes?
A frequent payroll question is what mistakes employers commonly make with their payroll. For starters, employers are known to misclassify employees, especially regarding the qualification for overtime. This can result in over- or under-paying employees. Simple pay miscalculations are also common, such as issuing erroneous retro-payments and incorrect benefit deductions. Records can be another source of mistakes (and frustration), as business owners aren’t immune to forgetting to track employee hours or overtime. Business owners have also been known to forget to report forms of taxable compensation with tax filings, such as stock options and travel awards. Missing deadlines can lead to late fees and even regulatory fines. Finally, issuing incorrect W-2s can cause financial and legal trouble not only for you but also for your employees.
Some general practices to avoid these common mistakes include establishing clear and comprehensive payroll policies and procedures. You should evaluate your payroll procedure or provider periodically. Automating and/or integrating your payroll process will help keep it consistent and efficient, as will using a payroll calendar and checklist. Finally, keep up to date on payroll regulations, be they federal, state, or local.
What Forms Do I Have To Submit?
Another common payroll question is one that comes up during tax season: What are your filing requirements? Business owners need to report all wages, tips, and other compensation paid to employees. The IRS requires specific forms depending on different factors. Examples include whether you withhold federal income tax, Social Security, or Medicare, if you pay farmworkers, or if you withhold federal income tax from non-payroll payments. Additional required forms include federal unemployment taxes and providing your employees with W-2s. State forms may include withholding, unemployment, paid leave among others. Local jurisdictions may also require regular withholding and submittal of returns.
Should I Hire a Payroll Provider?
As a business owner, you have a lot on your plate running your business already. On top of everything else, handling the payroll manually is a duty you may not want to have. Processing payroll in-house gives you direct control over how your payroll is run, but it also means you have to do all the calculations, file all the proper forms and reports, keep all the right records, or hire someone to do so. A third-party payroll provider is generally less expensive than hiring a full-time accountant and relieves you of the burden of managing your payroll. Professional payroll providers also make it their business to keep up with the laws and regulations for payroll, ensuring you’ll be compliant.
Come to Payroll Vault for Your Payroll Needs
Business owners like you are just the customers we’re looking for here at Payroll Vault. We’re a payroll service provider with answers to your payroll questions, a variety of payroll solutions, and additional services, such as human resources, background checks, and labor laws poster services. As our client, you and your employees will have 24-hour access for convenient, secure sending and receiving of payroll documents, as well as a secure online portal for all your sensitive payroll information. Find out more about what we can do for you and your business; contact us for a quote today, or come visit your nearest Payroll Vault location!