After many years of running a successful business, you may have noticed that your accounting system is not as organized as it once was. One reason for this could be because you are now tracking more information than ever before. For example, if you hire employees, then you need to keep track of their salaries and taxes to pay them accurately. If this sounds like something that might be happening in your business, then read on! This blog post will walk through the steps needed to create an accurate payroll process for your company so that no one gets paid too much or too little!
Determine What You Need To Track
This is where things can get complicated. You want to make sure that you are tracking the right information in order for your business, but this may require some legwork on your part. To begin, ask yourself these questions: Is my business a corporation? If so, what type of corporation (S or C) and what tax year does it use for filing taxes. Do I need to track information about employees such as salaries or expenses that might be deducted from their paychecks? Is there anything specific that I need to know about how the IRS classifies my business? Are any of your clients that considered contractors? How do you keep records on this?
Do not forget about any employees who are on commission, as this will affect how they should be paid and what taxes (and social security) needs to be taken out of their paychecks. This can get complicated if your business uses an outside payroll service because these third parties may automatically deduct taxes for your company without considering whether some professionals might make more than $600 per month in commissions alone. This means it would be wise to talk with them first before making deductions from anyone’s paycheck so that both parties understand each other better. You want everyone clear on all expectations when using a payroll service.
Use A Third-Party Payroll Service Provider
If keeping track of it all is just too much, consider using a third-party payroll service. This will take some of the burdens off your shoulders and allow you to focus on growing your business without worrying about what needs to be paid when!
A good place to start would be with the company that provides the benefits package for employees such as a paystubs generator that provides online access for tracking claims, information, etc., In addition, they may also have forms that can help you keep track of any deductions made from each paycheck.
To get started right away look into choosing an online accounting software solution like Xero where it’s easy to set up accounts and make invoices to keep track of everything.
Keep A Spreadsheet
A good place to start is with a spreadsheet. Create columns for the information mentioned above and record it as you go along. You can continue with your tracking method if this works well, but make sure that all of those involved in payroll have access to the records so they know what has been recorded, who contributes how much, etc.,
In addition to keeping track of salary history and pay increases or changes some other details will need attention as time goes on: tax deductions (student loan interest deduction, IRA contributions), 401k matching percentage from employer, Flexible Spending Account elections benefits offered by HR department such as health club membership discounts.
Keep Records For At Least Three Years
Records of salary and benefits should be kept for at least three years (although some experts say keep them longer). This is because the IRS does not have to follow any specific time limit when it comes to requesting information.
For example, if you pay an employee $100 on February 15th, 2014 but don’t record that payment until March 2015 then there is no issue with this as far as taxes go. However, if your business were audited by the IRS in 2016 they would ask about that extra $100 so having good documentation will help clear up misunderstandings easily.
This also applies to deductions made from each paycheck such as tax withholding or 401k contributions which are deducted pre-tax. It is important to have records of this for three years so that if there are any issues or questions about them you can easily show what was paid and when it was paid too.
When You Hire An Employee
When you decide to bring on a new person, the first thing that needs to be handled is payroll. You will need to open up a new tax withholding account for the employee, choose an appropriate payroll frequency (usually weekly or bi-weekly) and submit any W-Forms needed. Most employees are paid via direct deposit so you should provide them with bank information including routing number and account number along with access to online banking if possible. Some companies do still pay by check but this is rare due to all of the security risks involved in mailing checks around.
After that, it’s just a matter of following your records! With everything set up correctly, there shouldn’t be anything more complicated than making sure that each paycheck reflects deductions made pre-tax such as 401k contributions, etc.
When An Employee Leaves The Company
When someone leaves your business it’s time to close that account you created for them. You will need to close out the withholding account by completing a W-Form and submitting it along with any final wage statements.
You should also submit any final tax reports or forms necessary, including an I-94 Departure Record if they are no longer in the country (this gets submitted when you pay them their last salary). Finally, make sure that all of your records reflect this change so you don’t have anything held over from before!
Keeping track of salary information and taxes for your business can be a daunting task. But it’s important to create an organized system so you know who gets what, when they get it, how much goes where etc. You should have all these aspects in place before beginning work with employees or subcontractors to ensure everything flows smoothly throughout the year.
