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Whether you outsource
your company's payroll management, or handle everything internally, the Payroll
Guide provides access to federal and state information about the latest published
laws, government forms, applications, and general payroll policies.
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| Federal
Information
Q. What
is a Federal Tax ID number and how do I get one?
Q. What
are the different Federal withholdings?
Q. What
do I need to know about Federal payments?
Q. When
will I receive my Form 8109 coupon booklet?
Q. What
are the Recurring Federal Reports?
Q. What
do I need to do when I hire a new employee?
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| State
Information
Q. What
do I need to know about State wage hour laws?
Q. Do
I need to keep track of independent contractor wages?
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| Other
Things to Consider
Q. What
forms will I need for employees?
Q. What's
the best way to avoid IRS penalties?
Q. What
are the required records I need?
Q. How
do I determine a payroll policy for my company?
Q. What
are some sample deductions?
Q. How
do I determine if I should outsource my payroll? |
Q.
What is a Federal Tax Identification number and how do I get one? |
| A. You must file for a federal tax identification
number or EIN (Employer Identification Number) to ensure that federal payroll
tax withholding payments, Social Security contributions, and federal unemployment
payments are properly credited. After your Application (Form
SS-4) is submitted to the IRS, you will receive a letter with your EIN
and a coupon booklet (the 8109-Federal Tax Deposit). This booklet is essential
for payment of federal payroll tax obligations. |
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| Q.
What are the different Federal withholdings? |
| A. Federal Withholding taxes - These are taxes
paid by the employee and are calculated on individual employee data (wages, marital
status, exemptions and frequency of payroll). Commonly used tax tables are listed
in the IRS Employer's Tax Guide (Circular E).
Social Security and Medicare
taxes (Federal Insurance Contributions Act or FICA) - Taxes are paid by the employee
with matching contributions paid by the employer. For 2001, Social Security
tax is 6.2% (0.062) on the first $80,400 of each employee's gross wages; Medicare
tax is 1.45% (0.0145) of each employee's gross wages. There is no wage limit,
and the employee and employer each contribute at these rates.
Federal
unemployment taxes (FUTA - Federal Unemployment Tax Act) - Taxes paid by the employer
only is calculated at the rate of 6.2% (0.062) on the first $7,000 of gross wages
paid to each employee. In figuring your FUTA tax, you can deduct a credit of up
to 5.4% (0.054) for state unemployment taxes paid resulting in a net federal unemployment
tax of 0.8% (0.008). All percentages and gross wage limits should be verified
every January 31st. |
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| Q.
What do I need to know about Federal payments? |
| A. The first recurring federal tax payment
is the federal withholding and Social Security and Medicare (FICA). Tax payments
are combined into a single payment, the 941 deposit. Frequency of payment
and deposit method are determined by the amount of tax liability incurred. Consult
Circular E to determine your frequency of deposit.
Another recurring
federal payment is Federal Unemployment Tax (FUTA), or the 940 deposit.
Taxes for each quarter must be paid on or before the last day of the calendar
month following each quarter. If the tax due is less than $100, it can be carried
over to the next quarter. Payments for both the 940 and 941 deposits are made
by using coupons from the IRS 8109 booklet or by paying through the IRS Electronic
Funds Transfer Payment System (EFTPS). InterPay can provide this service to you
through our TaxSmart offering. |
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| Q.
When will I receive my Form 8109 coupon booklet? |
| A. The 8109 coupon booklet is sent to
you once you have applied for an EIN. Complete this coupon following instructions
in the booklet. A check made payable to the bank, along with a completed coupon,
should be deposited at a bank designated to receive federal tax deposits. Retain
the dated bank receipt for your records and record all deposits in your 8109 booklet
for easy reference.
If the amount of withheld income and employment taxes
exceeds a certain amount during a "determination period," employers are compelled
by law to deposit them and any other federal depository taxes by electronic funds
transfer (EFT). The IRS notifies businesses by letter when mandated to file electronically. |
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| Q.
What are the Recurring Federal Reports? |
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A. Form 941 is a reconciliation of federal
tax withholding and FICA payments. It must be submitted once each quarter by the
last day of the month following the calendar quarter.
Form 940
is the federal unemployment report. It should be completed and filed by January
31st following the close of the calendar year for which the tax is due.
Forms W-2, W-3, 1099, 1096. Annually, every employer must provide a Wage
and Tax Statement (Form W-2) to each employee who earned taxable income. The employer
is also required to submit a Transmittal of Income and Tax Statements (Form W-3),
along with copies of all W-2s to the Social Security Administration. If you provided
wages to a subcontractor, you must also provide miscellaneous income reports (1099
and 1096). |
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| Q.
What do I need to do when I hire a new employee? |
| A. Federal law stipulates that employers
must report W-4
information on all new employees, as well as the name, address and EIN of
the employer to a specified state agency within a certain number of days from
date of hire. Individual state requirements differ and some states require employers
to report more extensive information about newly hired employees. Contact your
state's Department of Revenue, Department of Employment & Training, or Department
of Labor.
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| Q.
What do I need to know about State wage hour laws? |
| A. Many states have adopted their own
wage-hour laws that quite often are more stringent than federal laws. Many states
also govern such employee wage practices as frequency of payment, method of payment,
and employee's right to accrued vacation or paid time off. State and federal laws
may overlap. In those areas, the law requires that the governing body more generous
toward the employee should prevail. |
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| Q.
Do I need to keep track of independent contractor wages? |
| A. Independent contractors are responsible
for keeping their own tax records and making the appropriate (and legal) tax payments. |
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| Q.
What forms will I need for employees? |
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A. Employee's Withholding Allowance Certificate
(Form
W-4) Completed by the employee, form W-4 provides you with the basic information
required for payroll. The employer must retain this form, and a copy must be filed
with your state in a timely manner. InterPay's New Hire Reporting service reports
this information for newly hired or re-hired employees and maintains this information
for you if changes in circumstances occur (marital status, # of exemptions, etc.).
Employment Eligibility Verification Form (Form
I-9) [link to downloadable form] Information regarding Form I-9 may be
obtained from the Immigration and Naturalization Service. Failure to comply may
result in civil fines. Employers must retain this form together with their employee's
W-4 |
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| Q.
What's the best way to avoid IRS penalties? |
| A. Keeping accurate records is an essential
part of owning and operating a successful business. With payroll it is especially
important because of the substantial penalties the IRS imposes on inaccurate and/or
late payments and filings. If you outsource your payroll, ensure your provider
not only gives you copies of all records and transactions executed on your behalf,
but that they also cover any penalties that arise due to inaccuracies or delays
in filing due to their error. Payroll management services, such as InterPay's
Tax Smart service, assume responsibility for timely and accurate processing
of all your payroll tax reporting and filing services. |
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| Q.
What are the required records I need? |
|
A. You need to have the following records:
Payroll
management service providers, such as Interpay,
can assume liability for timely and accurate processing of all your payroll tax
reporting and filing services. |
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| Q.
How do I determine a payroll policy for my company? |
| A. Set up payroll policies based on your
particular business practices. Here are some questions to consider:
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What constitutes regular hours? -
When to start paying overtime and at what rate? -
How an employee will be paid (hourly or salary?) -
Frequency and sick-time rate on commission or bonus
checks? -
How vacation and holidays
will be allocated and tracked? -
Who
within the organization will research and coordinate employee benefits? -
How can payroll deductions reduce the number of
money transactions? -
How to
ensure the employer is paid first? |
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| Q.
What are some sample deductions? |
| A.
Deductions could include the following: -
Employee
portions of insurance benefits -
Garnishment
payments -
Savings plans -
Uniforms -
Pension
plan contributions -
Union dues -
Repayment of employee loans -
Employee purchases |
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| Q.
How do I determine if I should outsource my payroll? |
| A. When determining whether to outsource
your payroll or do it in-house, consider factors that may apply to your business:
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Who will calculate payroll
taxes and accept responsibility for timeliness and accuracy? -
What kinds of human resources are available? -
How much time can be devoted to payroll and related
tasks? -
What is my cost for
in-house software and stock? -
How
can my employees benefit (e.g. a retirement plan, direct deposit, etc.)? |
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| InterPay
is the smart solution for your business, offering cost-effective Standard
Payroll Package that can grow as your business grows. Flexibility means choice.
So whatever services you choose, you are always in control of your payroll management.
click here for more information |
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