If you have employees, you also have payroll responsibilities. In addition to properly compensating your employees, you must withhold certain taxes and maintain accurate records. Understanding your obligations and setting up a consistent system can prevent costly errors and potential legal complications.
Payroll management can be broken down into three stages:
Tip: Give yourself enough time to assess employee tax documentation, hours worked and other details. Without payroll automation software, you could spend up to five hours calculating wages and taxes prior to payday.
Tip: Schedule regular data reviews to ensure information, such as addresses, last names and hourly wages, remains correct. Involve employees in checking this information.
Tip: The IRS requires you to keep specific employment tax records (such as W-4 forms) for at least four years after taxes were paid.
Use the Form W-2, Wage and Tax Statement, to report to the IRS how much you paid in wages and how much you withheld in taxes for each employee who receives a salary, wage or other form of compensation from your business.
Mail each employee a copy of his or her W-2 by January 31 of the year following the reporting period. The due date for filing the Form W-2 with the Social Security Administration is also January 31. For the fastest and easiest way to deliver and file a W-2, use an online e-filing service like efile4Biz.