Issue link: http://cp.revolio.com/i/142672
employee payroll Once you've made the decision to hire one or more employees, a formidable new bookkeeping task—managing a payroll—enters into your life. It sounds simple enough—at the end of a pay period, whether it be one week, two weeks, or a month, the employer clocks the hours worked, calculates overtime or other extraordinary payments, balances the books, and cuts checks. Taxes Along with the time and expense of calculating wages and cutting checks comes the necessary paperwork and payments required by the Internal Revenue Service (IRS) and, most likely, by your state and local governments as well. Employers are required to keep records on wages and withhold taxes, including income taxes and unemployment taxes (which go to the IRS) and social security and Medicare taxes (which go to the Social Security Administration). Taxes are paid or put in an account with an approved bank according to a required schedule. The good news for small businesses is that there are no monthly tax deposit requirements for small businesses (under $2,500 in quarterly withholding). Many states also assess unemployment insurance and disability insurance payments, and some cities charge head taxes or Forms, Forms, Forms Most employers are required to withhold income taxes and federal unemployment taxes (which go to the IRS), and social security and Medicare taxes (which go to the Social Security Administration). Contact the IRS (www.irs.gov) to get copies of publications 15 and 15A for a complete explanation of rules for withholding. Employers and employees are also required to verify US citizenship or employment eligibility with the Immigration and Naturalization Service. You and/or your employees will need: • mployer Identification Number (if you need an EIN, E you can request one using IRS form SS–4). • Employee's Wage and Tax Statement Form W–2. • Employee's Withholding Allowance Certificate Form W–4. • Employment Eligibility Verification Form I–9. • Employer's Quarterly Federal Tax Return Form 941. • Employer's Annual Federal Unemployment Tax Return Form 940. If you should decide that hiring employees is not for you, you may still choose to hire independent contractors to perform certain tasks for you. Even so, there are forms to fill out (1099), and the IRS has very specific criteria for determining who is or is not an independent contractor. other taxes based on the number of employees working at the business. Employee Rights In addition to tracking employee wages for tax purposes, a business with employees is required to keep records demonstrating compliance with the Fair Labor Standards Act. FLSA is designed to protect an employee's rights and covers such areas as overtime pay, minimum wage requirements, equal pay for equal work, and also regulations governing the monitoring of tips, which employers of employees who receive tips are obliged to do. If you have multiple employees, one option is contracting for outside payroll services. Doing so can save you time with payroll management, as well as eliminate some risk of incurring IRS penalties for faulty or tardy compliance with regulations because you inadvertently missed a deadline. Many of these outside payroll services accept liability for any penalties that result from their failure to meet the regulations. The downside of hiring a payroll service is the expense. If you intend to manage payroll yourself, at the very least invest in accounting and bookkeeping software that will allow you to use employee and wage information entered in one place for all of your tax reporting and bookkeeping tasks, including payroll. Such software, like Intuit, is easy and cost effective to use and can be readily updated as tax rules change. SPH