Payroll Processing Services and State Taxes
Payroll Processing Services manage the payment of wages a company pays to its employees. Generally, there are a relatively large number of employees who work a for a mid to large scale corporation. Depending on their job, their seniority and a number of other factors, every employee is offered different amount of wages.
Some are offered to work on a contract basis. They are paid depending upon how many conditions of their employment are fulfilled. On the other hand, others are offered a steady job with a regular salary. There are bonuses, monetary incentives and other benefits offered to keep the employees happy and motivated. Sometimes, deductions are taken for several reasons; such as insurance, retirement packages or just for unsanctioned leaves. For such complex calculations, companies have an option of employing Payroll Processing Services.
Steps for Payroll Processing
The procedure for setting up a proper Payroll Processing Services System involves following steps;
1. Preference of the Employer
On one hand, a business owner could choose to have his or her company’s payroll processing services requirements fulfilled internally. They can utilize a personally deployed system while issuing their own payroll reports to tax agencies or other relevant authorities.
On the other hand, said business owner can outsource these services to a third-party agency. This agency having no direct ties to the company. In such a case, the spending of businessowner’s resources will see a huge reduction. You would receive the ready-made information packet that has been analyzed and processed thoroughly. This service will be delivered for a much smaller fee than anticipated. It would certainly be lesser than hiring a whole department of personnel to perform the same service.
2. Setting up Compensation Codes for Workers
Initializing state tax return details may include setting up workers’ compensation codes. Your accountants, legal aides or others familiar with your company’s inner workings. It will help you determine which workers’ compensation class should your company choose.
3. Minimum Wage and Overtime Setup
Payroll Processing Services require the exact details of terms of employment. It includes the number of hours an employee must work in a week. It also includes how long are they permitted to take a break for whatever reason. An accountant can guide the business owner if they are uncertain how to determine minute details. Some employers offer or demand overtime work from their employees. It must be determined that how overtime is calculated in terms of wages.
The minimum wage paid to the lowest rung employees must be in compliance with the law.
4. Earnings, Benefits, Deductions
You must determine what and how your employees will earn their wages in return for their services. Moreover, how much benefits will be offered to them as an incentive to keep up the morale. Finally, what deductions must be made from their wages for any violations of contract. Most employers classify their employees earn as;
• Hourly Wages
• Monthly Wages
• Contract Basis; i.e. per product / per service wage
• Bonus Payments
• Overtime etc.
Benefits, such as bonuses, medical insurance, life insurance, company car, company house etc.; and deductions, such as insurance premiums, retirement plans etc. must be calculated. It must be analyzed how they affect each employee on an individual level. This is one of the basic functions of Payroll Management Processing.
5. Adding Employees to the System
It does not matter if you pay for services of Online Payroll Processing through a website, application or a software. It does not matter if you employ the services of an outsourced payroll processing service either. They both provide you with a list of requirements you must ask the employee to fulfill. These requirements usually consist of personal information, such as;
• Social Security Number
• Residential Address
• Other optional information a company requires from its employees etc.
You must choose in what manner the employee must be paid, such as;
• Contract Basis etc.
Tax information and workers’ compensation class codes are chosen specific to each employee to avoid mixing up information. Finally, the employee chooses their modes of payment. Such as; direct deposit, a printed check, a pay card or a combination of all three.
6. Tax Filing
Payment of State Income Tax Return is very important for employee and employer alike. Filing Payroll Taxes must be accurately done on time. The companies that choose outsourced corporations to do it for them, the filing is done on their behalf. However, internal filings come with their own issues, all of which the employers themselves are responsible to sort out. Some agencies require online payroll tax filing, which has become a requirement in many states.
Payroll Processing Services also provide an easy opportunity as State Tax Calculator.
Note: You must submit your company’s Federal Tax Identity number to the relative tax collection agency. This information will be used on W2 Forms and other similar tax reports.
SG INC CPA is the Best Payroll Processing Service in Plano, Texas. We can handle simple or complex payroll processing on your behalf. Maintaining employee information, payroll management processing, paying employees and tax filing is easy to manage for us. We also offer the best Online Payroll Services in Texas. Contact us for more information.
We can help you processing your payroll
We can ensure you are cooperative with all the payroll laws, and follow the established industry-wide practices in Compliance with the State.
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I highly recommend Mr. Asim Shamim from SG INC CPA. His firm is one of the best I have worked with. I own a small transportation company in Texas. Management of taxes and Payroll Processing for drivers or employees is not easy in this state. There are very few who truly understand the business and the laws associated with it. But Asim fully understand it. I commend him for his excellence.
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IRS Form 940 is formally called ‘federally unemployed tax annual report form’ or FUTA Tax. It is used to report and pay the unemployment taxes to IRS. A business owner, who employs people under him or her is obligated to report and pay the unemployment taxes. A fixes amount for this purpose must be set aside for this tax and paid with Form 940 every year.
Unemployment taxes are necessary. They are the government’s way of ensuring the terminated or laid-off employees are not left to fend themselves. Especially if they suddenly find themselves out of a job for whatever reason.
Each state has its own unemployment’s tax wages calculation measuring sticks. For the state of Texas, $9,000 is the amount subject to tax with a minimum rate of 0.45% of the employee’s wages, and a maximum rate of 7.47%.
Employers are required to count all full-time, part-time or temporary employees for unemployment taxes.
A Form 940 is usually due on January, 31st of a given year.
However, you must be careful, as the payments for your FUTA Tax may be due before the Form 940’s due date, if it is substantial enough i.e. $500.
Here’s how you complete a Form 940;
- Fill information about your business and your state unemployment tax status in first section.
- Determine your FUTA tax for the year and fill it out.
- Calculate adjustments for the state unemployment tax payments.
- Finally determine how much is due on your part to the state.
Except for a few very small-scale businesses, almost all employers are obligated to pay the wages to their employees. The wages could be paid on a monthly or a semi-weekly basis. The taxes such as, withholding income taxes, social security and Medicare are automatically withheld. These are reported to FICA in Form 941 or a quarterly basis.
- The first part of Form 941 requires basic information. The employer’s name, address and employer identification number (EIN) are included. It also includes for which quarter is the form being filed.
- The second part explains tax deposit schedule for employment taxes. For most employers it is either monthly or semi-weekly, as stated above.
- Part three asks if or when an employer has stopped paying wages to the employee. It also asks if an employer hires seasonal employees.
- The fourth part requires the IRS to speak to a third party, such as a CPA. Fulfil the relative third party’s phone number or five-digit personal identification number.
- Part five requires date of signing, a phone number and personal signature.
The deposits might not match the amount of employment taxes owed for a quarter. If so, then the required payment can accompany the form. However, it does require an additional Form 941V Payment Voucher which helps the IRS process the payment properly.
You may use Form 941X, Adjusted Employer Quarterly Tax Return to amend the errors in original Form 941.
Employment taxes are a huge responsibility. You can learn more about them by contacting us directly.
941 Payroll Tax Penalties
The 941 Payroll Tax Penalties are often severe. They are imposed for not filing on timely basis or not making the due payments.
- By failing to file, you can be penalized by IRS. Fines begin at 5% of due tax. They can increase up to 25%.
- By failing to pay due money, you can be penalized for the late payments. Penalties start at 05% of the due tax. However, this fine may increase to 25%.
The IRS can impose interest charges on the payable taxes in addition to the 941 Payroll Tax Penalties. The interest is calculated at the standard federal short-term interest rate. This rate comes down to 3 percentage points. Moreover, the interest is combined daily. The calculations start running the day taxes are owed. Therefore, you are better off paying the debt as soon as you possibly can.
Penalty calculator: find out the value of not paying up!
- Your payment is 1 to 5 days late: 2% of the amount owed
- Your payment is 6 to 15 days late: 5% of the amount owed
- Your payment is 16 or more days late: 10% of the amount owed
- If you’re notified of your wrongdoing and you are paying within 10 days: 15% of the amount owed
W2 Form is a standard IRS form that employers must provide their employees at the end of each year.
The W2 form for taxes summarizes a few parameters. Such as, the payroll amounts and taxes that have been paid to the employee in the applicable tax year.
The W2 informs the employee what the employer reported to the IRS in regards to the employee’s;
- Gross Wages
- Federal Withholding Tax
- Social Security Tax
- Medicare Tax
- Other State and Local Income Taxes
Payroll W2 also includes payments for nonqualified benefits and dependent care benefits. Such as, for the employees who receive a tip from the tip pool.
Employees use the W2 Form as a starting point in preparation of their individual income tax return.
Some tax payers file their income tax return on paper. They must attach a copy of W2 to the front of their tax return.
For the E-Filers, the W2 information is transmitted along with the electronic version of the return.
Form 1099-MISC is used to report Miscellaneous Income to the IRS by the taxpayers.
Independent contractors, freelance experts, sole proprietors or self-employed individuals receive them from a client who paid them more than $600. This form can also be used to report the miscellaneous compensation services. This includes rents, prizes, awards, healthcare payments and attorney fees etc.
A Form 1099-MISC is one of the many in 1099 series. This form is typically received by the tax payers shortly after the tax year has ended.
This form is used by anyone who received more than $600 annual payment in;
- Prizes / Awards
- Medical payments
- Services performed by a non-employee
- Crop insurance proceeds
- Payments for fish
- Payment from a Notional Principal Contract
- Attorney fees
- Fishing boat proceeds
1099-MISC Form can be used to report earnings from consumer products of $5,000 worth for resale. This resale must be done at any other location than a permanent retailer.
The payer is required to send the form to recipient and IRS by 31st January. Recipient can attach this form to the back of their tax return filings.
If you earned less than $600 and do not have a 1099-MISC, you must still report your income to the IRS.
Form 1099-Misc could be a Tax form that reports the year-end outline of all non-employee compensation. The 1099-Misc form covers rent, royalties, self-employment and self-supporting contractor revenue, crop insurance profits, and a number of other forms of miscellaneous earnings.