Owning a business involves a long list of bookkeeping chores, but few are as time-consuming and complex as payroll. In addition to figuring out how much your workers have earned, you’ll also have to calculate their withholdings, sick days accrued, 401(k) contributions, and a host of other deductions. Below is a quick guide to the process and how a payroll service provider can help.

How the Payroll Process Works

Collecting Employee Information

Every new employee should fill out a W-4, as well as any forms required by your state, which provides the information you’ll need to calculate their taxes. You’ll also need a form 1099 from each independent contractor you hire, along with your workers’ bank information if you’re paying through direct deposit.

Keeping Track of Hours

Accurate payroll depends on having a dependable system for tracking hours. Most business owners opt for digital time-keeping programs, which create reports that can be imported directly into your accounting software.

Calculating Taxes & Withholding

Multiplying an employee’s hours worked by their hourly pay is only the start of the process. From there, you’ll need to deduct their federal income taxes, state and local taxes, Social Security, and Medicare, as well as 401(k) contributions and health insurance premiums. Your accounting software can automate most of these calculations for you, as long as it’s properly configured.

Why Many Businesses Hire a Payroll Services Provider

A specialized payroll provider takes the chore off your hands entirely, leaving you free to work on building your business. Because they focus entirely on payroll, they usually have access to advanced software solutions, allowing them to provide accurate results more quickly than most business owners could achieve on their own.

Along with advanced software, many third-party payroll providers offer cutting-edge timekeeping solutions that aren’t in the budget for most small businesses. Finally, they constantly monitor changes in the tax code, adjusting withholdings and submitting payments on time, helping you avoid potentially costly trouble with the IRS.

If you’re hiring your first employees in Litchfield, CT, let Dianne M. Saunders, CPA handle the payroll so you can concentrate on what you do best. This accounting firm has been serving businesses throughout the area since 1992, offering a comprehensive range of financial services with a personal touch. Visit their website or call (860) 567-3022 to learn more about their payroll services.