Here’s a frightening fact: many businesses calculate their payroll and payroll taxes incorrectly. What’s worse, miscalculations often go overlooked. That can cost your business time and money and may even lead to legal issues. So if you’re wondering how to do payroll correctly on your own and avoid all those problems, Sling is here to help.
In this article, we’ll give you a step-by-step guide to payroll preparation so you can be sure you’re not missing anything. Before we get to that, it’s important to discuss exactly what payroll is and what it isn’t.
Pretty simple, right? On the surface, yes. But within each of those categories, there exists multiple steps that you’ll need to satisfy and paperwork that you’ll need to complete. Here’s how to do payroll accounting yourself without missing any details.
We’ve broken down the payroll process into eight simple steps. The first four steps don’t require much from you, the manager, other than a bit of research and making sure everyone has their forms turned in.
Steps five through eight require some number crunching, but we’ll show you a software solution to make handling payroll much easier.
A federal employer identification number, or EIN for short, is like a social security number for your business. Be sure to apply for one before your business opens. You may also need a state EIN, so remember to check the business resources (Secretary Of State’s website) where you live.
Payroll laws will differ from state to state and city to city. There can even be significant differences based on what type of business you run. That’s why it’s crucial to do a bit of research before attempting to tackle payroll.
Some businesses pay their employees daily. Others pay them every two months. It all depends on the type of business you run, what your employees will agree to, and the laws where your business operates.
The federal government requires that all businesses file a W-4 and I-9 form with the IRS for each employee. The I-9 form is proof that an employee is a U.S. citizen and has the right to work in the United States. The W-4 form supplies the information you’ll need to calculate taxes for each worker.
The best way to track and total the hours worked by each employee is with a software tool like Sling. Sling keeps track of all your employees’ comings and goings (their hours worked) with both local and mobile clock-in.
Then, at the end of each pay period, you simply review the data to make sure it’s correct and edit as needed. After that, simply export the timesheet for payroll processing.
That’s the amount your employee would receive if there were no taxes (which there always are).
That last number ($775) is the net pay that your employee receives in his or her paycheck.
It’s also essential to keep track of the taxes you withheld (the $100 in the above example) because you’re going to need those numbers for the next step.
Depending on filing requirements, you’ll need to pay the government all the taxes withheld during a given period of time (e.g., every three months, every 12 months). So if the employee in the example above worked 45 weeks during the year and had the same paycheck every week, you would owe the government $4500 (45 weeks worked X $100 in taxes each week).
Your employee will use this information when preparing their own tax return at the end of the year.
So there you have it: how to do payroll accounting yourself. It may sound like tedious, time-consuming work (and it can be if you have several employees), but tools like Sling can significantly reduce the time it takes to process all the necessary information.
Sling simplifies the time-tracking procedure to the point that there are no paper time sheets or fixed terminals necessary. It also helps you track, control, and optimize labor costs. That can have a serious impact on your bottom line.
Please note that this is not an exhaustive list of how to do payroll. It does contain the most common steps in the payroll process, but some may differ slightly based on your business and where it operates. Be sure to review all federal, state, and local requirements — or consult with a professional — before calculating your own payroll.
For more free resources to help you manage your business better, organize and schedule your team, and track and calculate labor costs, visit GetSling.com today.
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