How to Run Your Own Payroll

So you are a small business owner and you have hired your first employee. It is time to set up your payroll process. But how do you do it?

There are typically three ways to process payroll. You can hire an accountant, do it yourself or hire a payroll service. 

Whether you run your own payroll is up to you but you do need to be aware of everything required of you in order to successfully do so. 

Payroll taxes are comprised of federal, state and local taxes, which are withheld from each employee’s paycheck. You can grab more information from the IRS’s website for information pertaining to Federal Income Tax, Social Security and Medicare Taxes, Federal Unemployment Tax and additional Medicare Tax. 

Once you are aware of which taxes are required of you to withhold plus the rate required of you for each, you can then consider moving forward with processing your own payroll. Below are the most basic steps you need to take to do so.

Sign up for an EIN

You need to register for an Employer Identification Number (EIN). This number is used by the IRS to identify your business. You can easily apply for an EIN online at www.irs.gov. 

Complete Form W-4

Each employee needs to complete a copy of Form W-4. This form documents employee filing status and allowances, which you need to calculate the amount of federal income tax to withhold from each paycheck. 

Decide on a Payroll Schedule

Will you pay your employees weekly, bi-weekly or monthly?  Decide carefully as this decision will impact your payroll and how often your employees are paid. Most prefer to be paid more regularly, meaning that weekly or semi-weekly are more popular options.

Calculate Taxes

You need to calculate taxes to withhold and withhold them. 

Pay Those Taxes

Finally, you need to pay those taxes, paying attention to due dates for each type of tax. Create a calendar or add these dates to an existing calendar so you are sure not to forget. Missing a due date can result in fines and/or interest. 

Taking care of payroll yourself is possible but may seem overwhelming at first. For help getting set up with it, reach out to us today!