Business Tips Pro

Tag: Payroll

  • 8 payroll terms every employer should know

    8 payroll terms every employer should know

    Are you an employer who has recently hired new employees? Whether you’re self-employed or work at a company that employs 10 or more workers, you need to understand how payroll works and the terms that come with it. After all, if your business runs payroll, it’s your responsibility to ensure that every employee is paid their correct wages and benefits, on time and in full! Here are eight payroll terms every employer should know

    1) Overtime

    Extra hours worked by an employee outside of their standard hours are called overtime, or time and a half. Federal law mandates that most workers be paid 1.5 times the regular hourly rate for each hour of overtime.

    2) Direct Deposit

    Direct deposit is when you authorize your bank to withdraw funds from your checking account, at a date and time you specify, and deposit those funds into another bank account. Direct deposit is an easy and secure way for employers to pay their employees without having to mail out paper checks each month.

    3) Gross Income

    Gross Income is the amount of money you earned in a year. Gross Income, also called earned income and income before taxes, does not include monies from sources such as investments, pensions,s or Social Security payments.

    4) Defined Benefit Plans

    A Defined Benefit Plan is a type of pension plan that gives a pre-determined benefit on the retirement date. Employers are legally required to offer employees this benefit, but the types and amounts of these benefits can vary greatly. The contribution to this type of plan usually only comes from the employer and taxes on the benefits are taken at retirement (benefits will be lower if withdrawal is made before retirement). Because there are many different types of Defined Benefit Plans and individual plans may vary depending on factors such as which company offers it or what union negotiated it, there’s no standard across all employers with regards to requirements for coverage and other aspects.

    5) Base Salary

    Base salary is an amount that is paid to an employee at a set rate of pay, on a set schedule. Base salary does not take into account any variable pay or bonuses.

    6) Fringe Benefits

    Fringe benefits are benefits other than wages and salary. While some employers offer these as a way to make work more attractive, they must be reported as income and are subject to employment taxes. Employees may not be reimbursed for their out-of-pocket fringe benefit expenses, but they are tax deductible by the company if the employee meets eligibility requirements and is not provided on a pre-tax basis. Common fringe benefits offered by employers include health care, retirement savings, disability insurance, life insurance, tuition assistance or discounts for employees or family members in particular situations such as childcare needs.

    7) Liability Insurance

    Liability insurance is a type of commercial insurance coverage that protects against risks and potential liability in the event that someone is injured on your property or as a result of your business’s activities.

    When it comes to liability coverage, there are several options. With higher limits, you’ll pay less per month. However, higher limits will also come with a more expensive monthly premium.

    8) Profit Sharing Plans

    Payroll is one of the most time-consuming and expensive responsibilities for any employer. Now, imagine that you could reduce the burden and save some money with a profit-sharing plan. When it comes to protecting employees from layoffs, restructuring, or closure of the business, profit sharing is definitely something to consider.

    While profit-sharing plans are not a guarantee against layoffs or business closures, when structured properly they can make an exit easier for both the company and employee alike.

    Profit-sharing plans can also lead to better retention rates by motivating employees with incentives in place for them if they stay at your company for a certain period of time.

    When an employee shares in profits, their sense of ownership increases, which decreases turnover and increases productivity among workers.

  • How to Do Payroll in Washington, D.C: The Definitive Guide

    How to Do Payroll in Washington, D.C: The Definitive Guide

    The federal district of Washington, D.C., has unique payroll tax laws that might confuse you if you’re doing payroll for the first time in Washington, D.C.. In this guide to doing payroll in Washington, D.C., we’ll cover everything from how to calculate payroll taxes, to where your business can get help with its payroll taxes, to what federal and local government agencies you need to report your taxes and pay your employees to. You’ll even find links to free forms your business might need!

    What is payroll?

    Payroll is one of the most crucial yet overlooked aspects of operating a business. When you’re ready to start your own company and work for yourself, you’ll need knowledge about how payroll works: what it does, how it benefits you and your employees, how much it costs to offer an employee wage or salary as well as what the federal and state rules are for paying employees or salaried workers in Washington D.C., Maryland or Virginia.

    Does my business need an accountant or bookkeeper?

    An accountant or bookkeeper is useful for managing finances and taxes when starting a business. However, this does not mean that you need one on the payroll.

    Employee vs independent contractor

    Many businesses have employees and independent contractors. Businesses with employees need to make sure that they are paying workers their required wage, withholding the appropriate tax withholdings (e.g., federal income taxes, Social Security and Medicare taxes), and making contributions for employment-based benefits like health insurance premiums, life insurance premiums, worker’s compensation premiums (for eligible states), and state unemployment insurance payments (in most states).

    Independent contractors do not have any wage requirements or employee benefits.

    Understanding your tax obligations

    As an employer in the District of Columbia, you will be required to withhold both Federal and DC taxes from your employee’s wages. Generally, the amount withheld by employers is calculated using either the Social Security wage base for employees earning $118,500 or less (in 2017), or twice the Social Security wage base for employees earning over $118,500.

    Hiring employees

    For each employee, you will need their social security number, address, and phone number (before the first pay period). You will also need their bank information for direct deposit. They may also want you to fill out a W-4 for them with their allowance for withholdings on their wages per federal tax law regulations.

    Tax forms for employers

    Establishing a business with any number of employees and you will need to comply with federal and state payroll tax laws that regulate how much you can withhold from your employees for tax purposes, how often you can pay them (weekly, biweekly or monthly) and when their payment cycles will start based on their pay frequency (beginning on the first day of work or retroactively). This section covers both federal and state payroll tax obligations.

    Tax withholdings from employee paychecks

    Generally, you must withhold 7% of an employee’s gross wages (the amount before taxes) and pay this to the District on their behalf as follows: 3% withholding for income tax; 2% withholding for disability insurance premium; and 1% withholding for emergency medical insurance premium. If the wages are taxable, you must withhold 2% of the gross wages (again before taxes) as both income tax and Medicare withholding unless one of the exceptions applies.

    Federal wage and tax statements (Form W-2)

    Both employers and employees must prepare Form W-2, but the process for doing so is different. Employers should provide copies of the form to each employee and file a copy with their federal employer identification number (FEIN) at the time they are filed with IRS. This can be done electronically or by mailing a copy to an address provided on the form itself.

    State wage and tax statements (Forms 941)

    The Federal Unemployment Tax Act (FUTA) imposes a tax on employers of 6% of the first $7000 wages paid to each employee during the calendar year with respect to their employment. The FUTA is an excise tax that is imposed on your company for employing people who may not be able to pay taxes themselves. Employers must remit payments quarterly by January 15th, April 15th, June 15th, and September 15th.

    Calculating annual payroll taxes

    Unlike other taxes such as sales and property taxes, payroll taxes are paid with every paycheck. For example, if a company pays its employees $10 per hour for 20 hours per week the annual gross salary is $40,000.

    Expenses related to commuting by bicycle, public transportation, etc.

    Bicycle commuting is a great way to save money and feel good about your contribution to the environment. It’s also a lot easier on your body than sitting in a car all day!

    Documenting expenses related to business travel and entertainment

    It is customary for employees traveling out-of-state to submit receipts related to expenses such as travel and lodging. These types of payments are considered out-of-state expenditures and may be deducted as long as they adhere to certain tax guidelines with the IRS.