It is exciting to grow your team as a small business owner. It means your business vision inspires people to invest their time as employees of your business. In addition, setting up a payroll system for small companies not only streamlines yourself as an employer and facilitates legal and regulatory requirements. A sound payroll system helps your business avoid IRS penalties.
Suppose you have previously used a business formation service to compile your business paperwork. In that case, the easiest way to set up your payroll system is to hire the same service provider to develop the Payroll system. For example, you have decided to register your small business using an automated service provider. It is recommended to use professional, affordable and accurate, full-service and timekeeping payroll processing services of that service provider to develop your payroll system. For more details on the ideal payroll system, please click here.
However, if you want to develop your payroll manually, you must follow the following.
Option 1:Use Manual Payroll
You can choose to do payroll for your business yourself, keeping in mind that you have the proper knowledge, robust calculators, and sufficient time to invest in the payroll system manually.
Here are ten simple steps on how to do payroll manually.
1. Get an Employer Identification Number(EIN)
It is necessary to get an EIN to run a small business payroll system; The IRS uses the EIN to identify and track your business payroll tax liabilities.
2. Register with Electronic Federal Tax Payment System(EFTPS)
Businesses are required to pay their taxes on time. That’s why they need to establish their payroll. The EFTPS allows you to pay your federal payroll and unemployment taxes online.
3. Register with the State Employer as an Employer
Before you run your manual payroll, you need to register as an employer in the state of running the business.
4. Mug up the State and Federal Labor and Pays Laws
Using automated services for payroll, you need not learn the state and federal tax laws and pay. However, running a manual system requires you to have good knowledge about relevant pay and labour laws.
5. Select your Payroll Schedule
It is necessary to select how many times you will run your payroll in a manual system.
6. Complete the New Hire Paperwork
It is essential to complete the new employee paperwork before putting the employee in the payroll system. Remember that automated service providers take these necessary forms from the employees electronically by enabling them to submit them in their software.
7. Share the Updated List of New Hires with the State
Using a manual payroll system requires you to update and report the list of your new hires to the state new hire reporting agency. Every state has its data requirements for their state new hire reporting agency.
8. Document Your Employee Compensation Terms Carefully
Compared to automated systems, manual payroll systems require you to keep an eye on how you track employee hours and handle paid time off and overtime payments. In addition, deduct the health contribution and retirement contribution from the employee’s paycheck.
9. Run The Payrolls
You can run your payroll once you have completed all your documentary requirements.
10. Get The Right Knowledge For Record Keeping
To get accurate knowledge about the federal tax filing requirement, visit the IRS website.
Option 2:Use Automated Payroll Services
The second option a small business may use is automated payroll services. In a manual payroll system, you need to keep money aside for your tax payment every time you run your payroll. However, automated payroll systems debit your tax liability from your business account and make the state and federal tax payments on behalf of your business. The automated payroll service providers submit your tax forms every quarter and year.
Option 3:Hire A Trained Accountant To Take Over The Payroll Process
If it is difficult for you to manage a payroll system manually and you don’t want to use the services of an automated payroll service provider. Another option may be hiring an accountant or payroll specialist. However, the drawback of using the option of the accountant is that it often costs more than using a payroll service as the payroll system is outsourced.
Option 4:Delegate The Existing Payroll To In House Bookkeeper
You may hire an in house bookkeeper to delegate the existing payroll system. Ideally, you need to hire someone with previous experience running a payroll system.
I hope this article has solved your problem, and you can select an option to set up your payroll system for your small business. However, the ideal payroll system recommended at the start of the article and the provided link will provide you with the best payroll services at the lowest price.