The Necessary Guide to Payroll for small business in 2022

The Necessary Guide to Payroll for small business

The Necessary Guide to Payroll for small business in 2022

In the world of business, there are certain administrative chores that have to be completed on a regular basis in order to stay compliant with local and federal regulations. One of these chores involves payroll forms, and knowing how to complete these forms can save you time, money, and headaches down the road. In this guide, we’ll explain what payroll forms are, why you need them, and which ones you’ll need to complete your business tax filings at the end of the year. You’ll also learn about filing deadlines so that you don’t miss any important IRS or state agency filing dates!

Understanding Employee Terminology

Many small businesses are family businesses, in which one or two people might handle payroll functions on their own. As a result, there can be a lot of confusion about what certain payroll terms mean. Are you confused by some of these common terms? A detailed guide with definitions of important employee-related terminologies. If you’re an employer who will be handling your payroll on your own, it is critical that you understand employee-related terminology and regulations. This document breaks down many of those complicated concepts into understandable terms so you can properly withhold and pay employment taxes as well as file all necessary forms throughout the year to comply with regulations and laws. 

Recording Time Worked

As a small business owner, you might be tempted to work around the clock and never take a vacation day. That’s what I did when I first launched my practice. Then I learned that it’s important (and safer) for your clients and staff if you take time off. Besides giving your mind and body a rest, keeping careful records of hours worked is an important part of being able to defend yourself in tax audits. The IRS expects that you have documentation about everything: time worked, specific job assignments, number of billable hours per client and so on.

See also  Why is a water heater important to keep?

Filling Out the W-4 Form

When you fill out your W-4, make sure you don’t claim exemption on your income tax withholding form. Exempt status indicates that no federal income tax is withheld from your paycheck (IRS withholdings will continue based on your filing status). Instead, you may want to indicate single or married filing jointly as well as zero or some other number of allowances. For those who are exempt, there are additional IRS forms and requirements (PDF), including filing quarterly estimated payments and providing annual paperwork verifying continued eligibility. Being exempt sounds like a sweet deal, but there are consequences – it can mean an interest-free loan from Uncle Sam.

Filling Out Form 941

The first payroll tax form new owners should worry about is IRS Form 941, which reports quarterly Social Security and Medicare taxes. You only have to file it if you have employees who earn at least $1,500 during a quarter—or $6,000 in a year. The form itself is relatively simple; just input your company’s name and address, total wages paid each quarter (and add up annualized wages), plus how much was withheld in federal income tax and Social Security/Medicare taxes.

Calculating Income Tax Withholding

When it comes time to calculate income tax withholding, use Form W-4. This form is required by law and contains information used to determine an employee’s Federal income tax withholding. In addition, there are optional lines on Form W-4 that can be used if you have a special circumstance (for example, more than one job or having too much taxes withheld at one job). The calculator below makes it easy to figure out how much money your employees should be paid in Federal Income Tax Withholding.

Use of payroll software

The use of payroll software is essential because, even though they may not think so at first, it can be a lot more complex than you would think. It is possible to do it yourself, but if you are going through all of these steps manually, then you may want to reconsider. Having an automated program will save a lot of time and energy in both hiring and firing. The moment that you are ready to hire people on a regular basis, then having a program will help with adding them up quickly and doing everything correctly from there. You do not have any reason not to get one when it comes down to it. If you already use one, then great! Keep on using it until there is something that needs improving about your process or system.

See also  7 best fire fighting equipments for buildings in 2022