Payroll services are a critical part of any business today. I'm going to walk you through the steps you need to follow. Today, I'm going to talk about how to do payroll? What are some of the options? What's involved with each option, and why you need a consistent method for doing it.
Okay, let's get started.
Ways You Can Do Payroll.
There are three ways you can do payroll. Keep in mind that whatever method you choose, you should be consistent to save you time, avoid headaches, and stay tax compliant. Each payroll method has its pros and cons.
One, You Can Do It Yourself Manually
Let's start with doing it manually. That gives you direct oversight of your timesheets and calculations, but it's time-consuming, and there's a good chance you can make a mistake in the process.
Two, You Can Use The Software
The second is to use payroll software. That could be a great time-saver, but you need to make sure it's a reputable product that will give you what you need.
Hire A Professional Accountant
And while hiring a professional accountant or an outsourced payroll service is the easiest method, it could be the most expensive.
How To Do Payroll Manually
Now let's go a little bit deeper into what each payroll method is and what it entails. Doing payroll yourself manually typically involves several steps.
You need to establish tax and registration information for your business. It includes getting your federal employee identification number, FEIN, setting a payroll deposit schedule, and finally registering with federal and state agencies to submit those payroll taxes electronically.
Specifically, with applicable state and local agencies, you must obtain your state's version of the employer account number and the unemployment tax rate for your business, which can vary based on your industry, specific state, and your history as an employer.
The next step is to have your employees fill out a W-4 form so you have the correct federal tax income information and withholding of the payment. These forms may need to be updated manually if your employees' circumstances change. Also, employees need to fill out an I-9 form to prove they're eligible to work in the US.
After that, you're going to choose your payroll schedule, whether it's bi-weekly, bi-monthly, or monthly.
Now, for each payroll schedule or each payroll period, collect timesheet data for your hourly employees and calculate the employees cheque. Make sure that you have the correct withholding taxes
deducted from those paychecks.
After you issued your payroll checks, make sure to remit payroll taxes withheld and accrued to both IRS and state and local agencies. Your total payroll liability amount dictates the frequency of those payments. Make sure to check with the IRS and your state for those. In some cases, the tax payment schedule could be semi-weekly, monthly, or quarterly.
Then, at the end of each period, you must file and report your payroll, which happens to be in both quarterly and annual intervals, depending on the form. You will also be responsible for giving your employees a W-2 form at the end of the year.
Ensure you have a consistent system for adding new employees and contractors to your accounting system to keep your files organized. Specifically, with subcontractors, which are different from employees, you must have them fill out a W-9 form, so you can have all the information ready for filing their 1099 forms.
Automated Payroll Services
Moving from the manual payroll workflow could be automated when you use payroll software.
When you use QuickBooks Payroll, this is what your workflow looks like after you have loaded all of the employee and tax-related information into it.
First thing first, you're going to do it if you're going to approve the timesheets from your hourly employees, which were created by them using their online access to their timesheet or maybe imported it from a cloud-based time tracking system, such as QuickBooks Time.
You're going to generate payroll checks with one click based on that timesheet data. And you're going to print those paychecks with the pay stubs or even process payroll via direct deposit. Most payroll software is set up to automatically withhold and submit those taxes when the salaries are created, and eventually electronically submit the payments timely and file the forms when they're due.
It is one of the most significant benefits when you use QuickBooks Payroll. Payroll software that integrates with your accounting system, typically, is the best of both worlds, giving you complete control over the process and the ability to automate some or most of the compliance components.
Outsourced Payroll Services
Okay, now this brings me to the last option: hiring a professional accountant or outsourced payroll service. Again, this is the easiest method but the most costly, as, essentially, you're delegating most or all the responsibilities to someone else.
Usually, working with a local accountant will give you more flexibility and access to advice. However, you will need to make sure that your accountant has all the necessary information on time. On an equal footing, hiring an outsourced payroll service will usually take many responsibilities off your plate, but it's not as flexible.
You might need to have all your payroll information ready two or three days before running payroll to give that outsourced service enough time to process those paychecks.
It's also possible to use both payroll software and an accounting professional advising you along the way, which provides some extra assurance and support without the whole expense of outsourcing your entire payroll process.
It is especially true when you use QuickBooks for your accounting, with QuickBooks Payroll, alongside a Bookkeeping professional that is also a certified QuickBooks pro advisor. It is the winning combination.
We are providing professional payroll services along with virtual bookkeeping services for your business. We are certified with QuickBooks and have been working in this field for more than a decade.