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Resources
How To Set Up A Payroll System
1. Employer identification number (also called ein number) - What is an EIN Number? An Employer Identification Number (EIN) is a nine-digit number that IRS assigns in the following format: XX-XXXXXXX. The IRS uses the number to identify taxpayers that are required to file various business tax returns. Call IRS to obtain one. EMPLOYER ID NUMBERS (EIN) (click here)
2. State and local Employer Identification- you may also need to secure identification numbers or account numbers from the various state and local taxing jurisdictions to which you will be reporting, depositing, and paying taxes. In many states, the federal EIN is also used for state income tax reporting purposes. Call your state department of revenue to find out how to get a number. For a list of state web sites click here.
3. You will need to have the Social Security number of each employee you pay. This information will be on the employees w-4. All new employees need to fill out a Form W-4 and I-9 form as soon as they are hired. Employees need to complete a new W-4 if they get married or divorced, have a baby, or need to change their withholding amounts.
Your can obtain these forms here:
- I-9 (pdf)
- W-4 (pdf)
- Form W-5 (pdf)
Advise your employees to use the irs withholding calculator(clickhere) to determine how many exemptions they should claim.
4. As required by law, You will need to withhold payroll taxes from your employees checks , FICA (Social Security), SWH (State Withholding), FWH (Federal Withholding), SDI (State Disability Tax), Medicare, and FUTA (Unemployment Insurance Tax).Tax withholding tables
The employee pays part, this is the part you deduct from their check every month, and the employer pays the remainder.
Employers must report income and employment taxes withheld from their employees on an Employer's Quarterly Federal Tax Return (Form 941 click here) and deposit these taxes in full to an authorized bank or financial institution pursuant to Federal Tax Deposit Requirements.
Employers are also responsible for filing a FUTA ( 2007 Form 940 -- Fill-in Form click here ) return annually, and depositing those taxes.
An employee who is eligible for the earned income credit ,EIC, and has a qualifying child is entitled to receive EIC payments with his or her pay during the year. To get these payments, the employee must provide to you a properly completed Form W-5. You are required to make advance EIC payments to employees who give you a completed and signed 2007 Form W-5. The employer's requirement to notify certain employees about the EIC can be met by giving each eligible employee Notice 797.
5. You will need to establish a pay period. A payroll period is the interval at which you pay your employees. Regular payroll periods are daily, weekly, bi-weekly, semi-monthly, monthly, quarterly, semi-annually, and annually. Employees can be paid hourly or a fixed salary.
6. Make sure you pay overtime workers one and one-half times their regular rate for any hours worked in excess of 40 hours in a workweek. Download
Publication 15, Circular E, Employer's Tax Guide for more information.
The Fair Labor Standards Act establishes minimum wage and overtime standards, as well as child labor rules (this applies to employers with two or more employees engaged in interstate commerce).
Important: Keep all records for employment taxes for four years. For a list of employment records to keep click here.
There are many payroll companies you can hire to to your taxes and file your reports. You can have your accountant do this for you or you can buy payroll software and do it your self.
Its always best to consult with your lawyer and/or account to help you get set up and to make sure you are in compliance with all laws and regulations.
Resources:
Accounting Software & Business Supplies
Quickbooks Do It Yourself Software - Tools and tax tables to manage your own payroll with confidence, right in your QuickBooks software
Check Mark Software -CheckMark Software has been dedicated to providing, fast, easy-to-use, affordable accounting and payroll solutions to small and medium-sized businesses since 1984.
ZPAY Payroll Systems, Inc. - Celebrating over 20 years of creating payroll software, PayWindow 2004 follows a long line of easy to use payroll packages starting with ZPAY, then ZPAY 3 and PayWindow.
SurePayroll - processing payroll can be done in just 5 minutes! All you need to do is enter payroll data.
Peachtree -The Peachtree Accounting product line automates your payroll process, providing you with a great deal of flexibility when setting up your payroll system.
As a Peachtree customer, it is extremely important that you have up-to-date payroll tax formulas to stay current with federal, state and local regulations.
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