Payroll Service

Payroll Service Information

What is Payroll Service?

Payroll tax reporting is a complex subject and, if not done correctly, opens your business to a host of penalties. Generally, employees are paid at a set rate, either on an hourly or salary basis. In the United States, employers are obligated to pay social security, medicare, workman’s compensation, state, federal, and often local taxes for each employee. An employer also must deduct a portion of these taxes and other fees from the employees’ paycheck, and all of these transactions must be recorded for auditing and tax purposes.
A payroll service encompasses all of these functions independently, freeing up the business owner’s time for more important matters. Once an account is established, the employer simply provides the payroll service with a list of all employees, the hours they worked, and any variances. This data is then processed and the funds are transferred from the employer’s bank to the payroll service’s account. Employees are paid either by standard check or direct deposit. The employer is then provided with payroll and tax reports.

What are payroll Taxes?

Payroll taxes are the state and federal taxes that you, as an employer, are required to withhold and/or to pay on behalf of your employees. You are required to withhold state and federal income taxes as well as social security and Medicare taxes from your employees’ wages. You are also required to pay a matching amount of social security and Medicare taxes for your employees and to pay State and Federal unemployment tax. Have each new employee complete IRS form W-4. You will use this form to calculate the amount of federal income tax to withhold from the employee’s wages. Most of the states have income tax structures that are based on the federal system, so you will use the W-4 to calculate the amount of state income tax to withhold as well.

What payroll taxes do we file?

  1. Form W-4, Employee’s Withholding Allowance Certificate: New employees fill this out to show their filing status and withholding.
  2. Form W-5, Earned Income Credit Advance Payment Certificate: Low income employees complete this to allow advance payment of EIC.
  3. Form W-2, Wage and Tax Statement: This is the report of income and withholding your business gives the employees every year.
  4. Form W-3, Transmittal of Wage and Tax Statements
  5. Form 1096, Annual Summary and Transmittal of U.S. Information Returns
  6. Form 1099-MISC, Miscellaneous Income: This is the income and withholding report you give to your non-employee payees such as contractors.
  7. Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
  8. Form 941, Employer’s Quarterly Federal Tax Return
  9. Form 945, Annual return of Withheld Federal Income Tax
  10. Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips

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