When you open your own business, you need to decide how to run payroll. Today you have several different ways to organize payroll. You can hire an outside source, you can download payroll software, or you can create your own spreadsheets.
All are ways to keep up with your employee’s payroll, and it’s essential to find the method that works best for you. If you only have a handful of employees, then it might be worth creating your own payroll spreadsheets. Do keep in mind, however, that if you do have quite a few employees you might want to consider outsourcing services to avoid errors.
To learn how to maintain your own business’s payroll, continue reading below. Here’s our guide on how to do your own payroll with ease!
Request Your EIN
Before you can complete your own payroll, you’ll need to have an EIN (employer identification number) for your business. This is a number given to your business by the IRS to give it a sense of identity. As soon as you hire your first employee, be sure to request your EIN.
Once you receive this number, you can then begin to pay taxes for your employees and pay the taxes on your business as well. You can request this number on the IRS website or by calling them.
Collect All Employee Tax Info
Each time you hire a new employee it’s essential to collect all employee tax information from them. You’ll do this by having each employee fill out a W-4 form. This form will give you all the information you’ll need to have taxes taken out of their paycheck and to complete payroll.
This information is crucial. You must ensure that all information is accurate and you take out the correct amount of taxes from each paycheck. When an employee has a life-changing event, such as having a child, getting married, or getting a divorce, you’ll need to have them fill out another W-4 form with their updated information.
Be sure to verify that each employee is able to work in the United States legally and to set up all banking accounts for direct deposits if that’s how you’ll pay them.
Create a Spreadsheet
Doing payroll yourself entails creating a spreadsheet on a program like Excel. The first thing you need to know is how many hours each employee worked if they’re paid by the hour. Don’t forget to add in vacation pay, overtime pay, sick days, and more.
The gross pay will be the number of hours worked multiplied by the amount of pay they’re given per hour. Now you’ll use their W-4 form to calculate how much taxes you’ll need to take out of their paycheck. You can also visit the IRS website and use their calculator to determine the exact amount.
Be sure to withhold all other taxes as well including social security, medicare, and withholdings for insurance purposes and more. You’ll also need to pay your own taxes for each employee. Don’t forget this step.
Determine Your Pay Schedule
How often do you plan to pay your employees, and on which day? You can pay your employees once a week, bi-weekly, once a month, or twice a month. Set up a schedule that works well for you, your business, and your employees.
Depending on what state you’re in, there might be certain pay-schedule requirements you’ll need to meet. You’ll also need to take into consideration the cost of completing payroll and sending out your paychecks as well.
Pay Your Employees
Now it’s time to determine how you want to pay your employees. Will you send out paychecks or pay them via direct deposit? Either way, you’ll want to have a way to provide them with a pay stub.
Pay stubs come in handy when employees need to provide proof of income to landlords, loan lenders, and more. You can use a check stub maker to create your own pay stubs for each employee. Be sure to place the pay stub inside each envelope with each employee’s paycheck.
When using accounting software for bookkeeping purposes, it might come with ways to set up a direct deposit to make things easier for you.
Keep Up With Paying Taxes
You’ll need to keep up with paying your own taxes throughout the year. Speak with the IRS about how often you should be paying your taxes and how to determine how much to ensure you’re not making any errors.
There are different forms you need in order to pay different types of taxes. You’ll need each of these forms and a way to keep track of your tax-payment schedule so you pay everything on time.
Consider Hiring a Bookkeeper
Maintaining your own payroll for your business can become overwhelming for business owners. There are many other things that you must keep up with. It’s also important to keep in mind that you’ll need to be careful not to make any mistakes when completing the payroll.
One great way to get your business’ payroll in check without having to worry about errors is to hire a bookkeeper. A professional bookkeeper will have the experience and the knowledge needed to do your payroll with ease, which can also give you peace of mind.
Learn How to Run Payroll Today
You’re a business owner, and it’s essential that you know how to run payroll without error. Use this guide above to help you start your own payroll process. When things become overwhelming, or when you begin to have more than a few employees, don’t hesitate to hire a professional bookkeeping service.
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