About 93% of Americans struggle with some level of math anxiety, and this includes business owners. If math isn’t your strong suit, tasks like payroll can feel overwhelming. After all, payroll involves doing math, figuring out confusing forms, and if you make a mistake, you could completely ruin payday.
To help you learn how to do payroll, without getting anxious, we’ve created this short but complete guide. We’ll review what steps you need to take, as well as the types of payroll calculations you need to know.
Don’t let a little bit of math scare you.
Read on to learn the ins and outs of payroll for businesses.
1. How To Do Payroll Schedules
For starters, when it comes to learning how to do payroll, you’ll need to decide what your payment schedule should be. Do you have a lot of employees working more than 40 hours?
If yes then a weekly payroll schedule will make it easier for you to calculate employee’s overtime. Another advantage of weekly checks is that employees will have an easier time paying for unexpected expenses.
Considering that 78% of workers are living paycheck to paycheck, the more frequently they’re paid, the easier it is to survive. However, bi-weekly payrolls are also convenient since it means you’ll only have to process payroll every 2 weeks.
2. Have Employees Fill Out a W-4
You’ll need to have all of your employees fill out a W-4 form. The W-4 form will document things such as your employee’s filing status as well as their allowances. If an employee has a lot of dependents or a lot of allowances, they’ll receive a larger paycheck with fewer taxes taken out.
3. Get an Employee ID Number
Next, when it comes to doing payroll for businesses, you’ll need an Employer Identification Number or EIN. Your EIN is a way for the IRS to recognize your company. Depending on the state you live in, you may need 2 EIN’s to comply.
4. Do Your Calculations
You’ll need to carefully begin calculating what to pay each employee. For instance, let’s say you pay your full-time employees a wage of $10 an hour. If each employee worked their full 40 hours, you’ll simply times their hourly wage by their hours worked, to determine their gross income.
Next, you’ll have to calculate what state and federal taxes you need to withhold. If math intimidates you, you can use payroll services to do all of the calculations for you. Additionally, you’ll also need to calculate your portion of taxes as the employer.
5. Remember To Pay Taxes
One of the most important parts of small business payroll is remembering to pay your taxes. By keeping accurate payroll records all year long, you’ll have an easier time handling tax time paperwork. Depending on where you live, you may need to pay taxes every month.
6. File All of Your Tax Forms
Next, every quarter you’ll also need to submit a federal tax return as the employer. You may also need to submit both state and local tax returns, depending on the location of your company. Finally, make sure you don’t forget to prepare your annual filings, including W-2’s for employees, at the end of the year.
No More Stressing About Payroll
Now you know how to do payroll so you can keep your business running smoothly.
By following all of the payroll tips in this article, you’ll be able to make it rain when payday comes! For more ways to succeed as a young professional, go ahead and check out the rest of this site.