Initial Payroll Set-up
Initial set-up of payroll is one of the most critical steps in the entire payroll process. If you are running payroll the old-fashioned way, by hand, then setup is straightforward. If you are using an accounting software program for processing payroll, it is critical to follow each step in setting up the program for payroll and then setting up each employee. QuickBooks for instance has several areas that must be completed for each employee.
• Enter the employee's personal information, such as address, Social Security number and date of birth. • Enter employee deductions for both federal and state. • Enter all compensation variables. • Enter possible variations in the pay cycles for each employee.
Gather the information for running payroll, such as time sheets and employment contracts. If your company pays everyone a salary rather than hourly wages, this step is simple. If not, you will have to enter each time sheet into your program individually and verify the total hours entered matches the total hours on your time sheets. Before processing the data, make sure the payroll date is correct in the system and that the total amount to be paid agrees with your external records. For instance, if 20 people are to be paid, total up the expected payroll and compare it to what your computer program states will be run.
Payroll Tax Liabilities
Once payroll is run, pay tax liabilities. Depending on the size of your payroll, pay federal liabilities on a bimonthly, monthly or quarterly basis. The Internal Revenue Service will advise you based on your current expected payroll size. After some experience, it will re-access your payroll and possibly change when you deposits need to be made. Deposits can be made at www.EFTPS.com or any federally insured bank. You will need payment coupons and an employer tax ID number to make these deposits.
In most states, deposit requirements reflect the deposit schedule of the Internal Revenue Service. However, some such as Arizona base it on the amount owed within a quarter. Check with your local taxing authority for further instruction.
Quarterly Tax Filings
At the end of each quarter, the state and federal governments require the employer to reconcile his accounts and file a quarterly tax return. For the federal government, this means filing a Form 941 tax return. The tax returns and requirements for the state vary with each taxing authority, so check with your state. The key at quarter end is to total each payroll run and the total tax deposits to make sure all required taxes have been paid.