Taxes, Tax Reports, and Payroll Services
With time cards collected at the end of each pay period, employees’ checks can be prepared. Those checks are for net wages. The amount that is left after hours worked is multiplied by wage and other income, social security, and other employment taxes are withheld. After withholding taxes from our employees’ wages, we are required to deposit the withheld taxes at an approved bank. Additionally, we are required to follow up with reports to the government, detailing employee’s earnings and withholdings.
The frequency and promptness with which you must make deposits and file reports depend on your total amount of payroll. After all, if you miss the deadline you will get hit with a nasty fine.
All the payroll check-writing, withholding, depositing, and reporting adds up to a lot of work. You can extend your accounting system to take care of it in three ways:
- Add on to a one-write system
- Contract with a payroll service
Add ons to one-write system
From your supplier, you should be able to get an add-on to the one-write system that will allow you to make out payroll checks and record net pay and tax deductions. You can obtain annually updated charts from the federal and state tax authorities that. Those will tell you how much tax to withhold and forms for the reports you must file.
Some generic small-business programs and specialized construction programs will generate payroll checks, distribute payroll costs to your job cost records and general ledger, and produce the reports required by the tax authorities. Annual upgrades modify your program to conform to changing tax laws.
Contract with a payroll service
By asking around at small businesses in your area, you can find a payroll service offered by banks or other corporations that will fill your needs inexpensively and reliably.
Of the three options, handling payroll on their computer may ultimately prove the most efficient. A good service allows you to take care of the payroll very efficiently. For a modest charge, the service takes the job from there. It cuts the checks, makes the tax deposits, submits the reports required by the tax guys, and sends over a copy of the reports. All you need to do is monitor the service’s work for accuracy and distribute the payroll costs to the general ledger and job costing records. As a bonus, if the service makes a mistake, it pays the penalty. It is easy to make mistakes doing payroll, and the penalties are brutal and swift so it’s nice to not be at risk.
The most attractive part of hiring a payroll service is that you increase your personal freedom. With payroll checks, you don’t have the flexibility you do with other bills. You can’t pay them a little sooner or a little later as you can sub and supplier bills. With a payroll service, you don’t have to schedule your life around payday. You can go out of town for a spontaneous vacation, and when payday comes, you call your project leads for crew hours, then phone the hours to your service. The service will deposit wages right to the employees’ accounts or have their checks in your mailbox by the time you get home.
Portions of this content was sourced and/or published in:
- David Gerstel, Running a Successful Construction Company