Payroll processing

So you have your own business and you have hired some employees, now how do you start processing payroll? There are several things that need to be included in payroll. First, you need to determine how much you are going to pay each employee. Second, you need to establish the withholding amount for each employee. Third, you must keep a running total of how much you paid your employees, how much was taken out for different taxes and how much you paid in taxes.

Since payroll processing can become complicated quickly, many companies have taken to hiring a third-party payroll company to handle everything. The average cost of a payroll company is $0.80 - $2.00 per check, plus a base account fee. The base account fee will include the cost to establish your employee payroll and to set up the pay period time table and tax filing requirements. If you include additional features such as online account access, direct deposit, and W-2 generation, you could be looking to spend $4.00 - $9.00 per check. Another option you have is to purchase payroll software and pay a monthly subscription. Generally, the monthly fees range from $14.95 - $60.00 a month. With payroll software, you have complete control over the reporting features, allowing you to pull past pay stubs at any time. You may even be able to complete a web page that allows employees to log in and view their paystubs and W-2s from previous years.

It is important to keep specific details of your payroll because you will need it to file your quarterly taxes. Plus, it is essential to have on file in case you are audited. Here is how the payroll process works:

1. You decide how often you would like to pay your employees, weekly, bi-weekly or monthly.
2. You withhold the proper amount from each employee's paycheck (using their Form W-4 and Federal, State, and local regulations).
3. You keep track of the withholding amount in software or by some other method.
4. You deposit the total Federal tax amount owed to the IRS. This amount must be deposited on a monthly basis.
5. You must also deposit the necessary amount to the State and local authorities.
6. Each quarter it is your responsibility to file an IRS Form 941. This form includes a summary of the monthly deposits you have made. At the end of the year, you are required to file IRS Form 940. This form summarizes all your quarterly Form 941s.
7. File the state forms that summarize your deductions and paycheck deposits. This form will vary from state to state and the date to file will change too. Some states want a bi-weekly statement while other states prefer a quarterly statement.

Since payroll is so complex, it is worth the investment to hire an accountant, purchase payroll software, or outsource your payroll services altogether. When you are shopping for a payroll processing company, you need to take the following steps:

Step #1 - Determine your budget.

Most payroll software has an upfront cost, plus a monthly or yearly subscription to maintain it. How much can your company afford to spend on payroll software?

 Step #2 - How many employees do you have?

Depending upon the type of payroll software program you select, you could end up with software that doesn't hold enough employees or software that is designed for a small business of 400 employees. You need to check for payroll software that is geared toward your business. 

Step #3 - What are your needs and wants?

What do you want your payroll software to do? Do you want the payroll software to take care of your quarterly and annual taxes? What about you're W-2s? You need to decide what additional features you need the payroll software to do and begin looking for different options. Most payroll software has the same basic features, but some just allow you to do it easier than others. Check for payroll software that includes a free trial so you can decide if it even will work for your company.

Using payroll software requires some serious time dedication on your part. You need to make sure you thoroughly understand payroll and payroll laws before you decide to use payroll software. An experience payroll accountant or bookkeeper may be the best investment for your payroll processing. They will be able to tell you what software you need to purchase and may be able to show you how to use it.

How about outsourcing your payroll?

Like anything else, payroll processing companies come with their benefits and disadvantages. Using a payroll processing company will allow you to get back to focusing on the needs of your company and working with your staff and customers. Having a payroll processing company will take out the extra money you spend on an accountant or bookkeeper. The cost to outsource your payroll may seem like a large investment now, but compare that to the salary of having a payroll accountant on staff, and you are sure to save some serious money. Another benefit to outsourcing payroll is that the payroll processing company will be in charge of keeping in compliance with the latest IRS tax laws. A good payroll company will assume all responsibility for any miscalculation.

Outsourcing your payroll will cause you to lose some control over your reports and other things. The cost to expand your payroll just $2,000 could take awhile to change and could cost a lot of money compared to adjusting it on your software. When you decide to use a payroll processing company, you need to thoroughly investigate if the benefits outweigh the costs.

Once you have made your decision, you need to investigate what company to use for your payroll processing needs. The standard rule for payroll software and for payroll processing companies is to obtain 2-4 different price quotes and compare them. You should always ask companies to price match their competitors. Most payroll processing companies want to keep you as a client and will be willing to negotiate your monthly rate.

 Here are some great payroll processing solutions to help you get started:

If you want a good payroll software program, you should consider purchasing VersaCheck payroll. The cost of this software is $70.00 to purchase and then you can subscribe to a 1099 service for $20 a year. VersaCheck payroll offers tax filing for employees and contractors. VersaCheck payroll includes vacation and sick leave accruals, pay frequency, and overtime. It supports all the latest state and federal tax forms. It will notify you tax deadlines and it will prepare tax forms for you. It offers multiple pay types for employees. The largest downside to VersaCheck payroll is that it does not import payroll data from all accounting programs. Once you have created a paycheck, you cannot edit it. You also cannot modify information that is printed on pay stubs. Despite its downsides, VersaCheck payroll does offer great organization features that will help you keep all of your employee records in the same file. VersaCheck also offers additional features such as linking to Qchex.com and having your paychecks automatically mailed to your employees. VersaCheck payroll also allows you to print W-4s and I-9s and store them for each employee. It talks to QuickBooks, Quicken, and Microsoft Money.

Perhaps you would like to outsource your payroll to a payroll processing company. One particular payroll processing company is PayCycle. PayCycle costs $19.99 up and this is relatively cheap compared to some other online payroll processing companies. With PayCycle, you can expect the following features: 

• Federal, state, and local tax calculations with 100% guaranteed results. 
• Free direct deposit. 
• Flexible paycheck methods, direct deposit or paycheck printing. 
• Email notifications when taxes are due. 
• Electronic tax payments.  
• Electronic tax filing of your 940s, 941s, and W-2s. 
• Easily integrate with QuickBooks, Microsoft Money, or QuickBooks online so you can export payroll information.  
• Customized list features 
• New hire forms, Form W-4 and I-9. 
• New hire state forms 
• Tax payment coupons with the correct payment amount, and e-mail reminders of the upcoming deadline. 

PayCycle is a great solution for a small business or even a medium-sized business. PayCycle starts at $19.99 a month and goes up from there. PayCycle is simple and easy to use. One of the best features to PayCycle is that it only cost $0.99 per month to add another employee. This means you can easily predict what your bill will be based upon the number of employees you have on staff.

Another popular company is Paychex. Many small businesses have been using Paychex for years and are unaware that they are missing out on savings. Paychex will price-match any of their competitors. If you have Paychex payroll processing services, you should ask for the best deal by showing them bids from other companies. Paychex offers tax filing, 401(k) and employee benefits, insurance, HR administration, time and labor solutions, and employee benefits. There are several other features you can add on such as direct deposit, Form 941 filing, and online employee pay stubs. Paychex will send you notifications when your quarterly taxes are due and they will pay them.