For individuals, taxes are mostly a once-a-year event, complete with groans, frustrations and bewildering calculations. But for businesses, handling payroll and taxes can become daunting year-round tasks that sap administrative personnel who often have other duties. Often, a specialist is needed to help set up payroll and human resources systems. Jerry Pavelec, president of EZNet Business Solutions, explains how this process works and how traps can be avoided.
“Every time you process a payroll, taxes are due. If a company does not have someone take custody of those funds, it is used for other operational purposes.
“The first step is to gather information about the employees into a database including full name, employee ID, date of birth, Social Security number and the department they work in.
“The data has to be submitted in a certain format that the employer can either upload using payroll software or fax to an outside firm.
“A lot of companies have employees in multiple states. Sometimes people get hired, sometimes they get fired. In these cases, the employer has to make a new entry or terminate an employee’s information from the system. The company issues a check to the terminated employee and makes appropriate changes in the database so all tax related information is updated.
“Paychecks are printed up and reviewed every pay period before being sent in overnight packages. A main server then calculates taxes for every pay period, every quarter and the fiscal year depending on the size of the company. It also creates employer and employee tax information.
“The most critical things are accurate and current information about all employees in a company. Record-keeping is key. Any bonuses they get, any advance or compensation has to be updated in the database. All this is important to calculate taxes for employees, as well as for the business owner.
“Business owners should also watch out for changing laws because if they don’t file their taxes correctly, the penalty can be pretty significant. The larger the company, the more complicated this can get. But systematic input of information can make this whole process super easy.”
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