Own a business? Want to save some money on payroll? Check out this helpful guide on how to do payroll taxes for your business yourself.
Filing taxes on behalf of your small business is a complex process influenced by earnings, business size, and more. One of the major factors involved in small business taxes is payroll tax.
This particular tax gets deducted from your employees’ paychecks. It’s your responsibility as a business owner to report how much of their money gets withheld so you can deposit that amount to the IRS. Incorrectly completing payroll may end up costing you a lot of money.
If you’re unsure of how to do payroll taxes and want to start handling it on your own, take a look at these six helpful steps to get started.
1. Implement an Accounting System
Online accounting systems often include a payroll processing option. Keeping your payroll process online and within a trusted system will help prevent errors and ensures all of your business’ information stays backed up.
2. Organize Employee Forms and Wages
Before hiring employees, you must provide the required paperwork you need to effectively handle payroll taxes. These include W-4 forms, I-9 forms, and legal verification. Legal verification ensures your employees are eligible to work in the United States.
Additionally, set up direct deposit for your employees and make sure you collect their bank account information beforehand. Keeping everything digital will make the payroll tax process easier for you when the time comes.
Organization is key when it comes to payroll, so if you need assistance, don’t hesitate to hire a payroll service to help you.
3. Create a Payroll Account
Keep your payroll expenses separate and create a bank account specifically for paying employees. This bank account collects tax money withheld from your employees’ paychecks. By keeping this account separate, you’ll find that it’s easier to track payroll expenses.
4. Figure Out Employee Wages
To efficiently track employee wages for payroll tax purposes, you must calculate each employee’s gross wages. You must also calculate how much money gets withheld from each of their paychecks.
Calculating gross pay involves knowing the number of hours your employees work, as well as the number of vacation days they take. If you offer paid time off, this is factored into the calculation.
Keeping track of this information is easier with an employee time tracking system. Implement a system for clocking in, clocking out, and recording vacation time.
5. Make Payroll Tax Deposits
Now that you have your payroll information nice and organized, it’s time to make payments to the IRS on behalf of your employees. The frequency of these payroll tax payments depends on the size of your payroll.
To make deposits, fill out Form 8109 or file online.
6. Stay on Top of Payroll Tax Reporting
Making deposits to the IRS is just part of the process. You must also submit reports for your business on a quarterly or annual basis. These reports describe tax liability, unemployment information, and other details to the IRS.
Mastering How to Do Payroll Taxes
Whether you’re new to business ownership or you just need a refresher, knowing how to do payroll taxes efficiently will help you save money. By following these six steps, you’ll experience significant cost-efficiency and peace of mind.
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