Payroll & Tax Processing: Understanding the Intricacies
Companies that require payroll and tax services must employ a highly reliable third-party provider to reduce the pressure from their HR and Accounting departments. Managing payroll is quite burdensome especially if done manually. By outsourcing, you are assured that reputable providers use the most sophisticated and updated software.
Payroll Preparation & Tax Filings
Two of the most complicated functions in this particular line of work are payroll and tax processing. Here is how the system works
For payroll preparation, here are the following tasks:
- Make a plan and create your checklist. Payroll laws and protocols frequently change. That is why, there is the likelihood of missing essential steps.
- Check all employee information. Make sure that details like complete names, positions, addresses, wages, benefits, tax withholdings, and Social Security numbers are accurate.
- Inform employees of benefits that have not been availed of according to company rules and regulations.
- Find out if yearly bonuses will be paid out during the current calendar year or the following calendar year.
- Ensure that workers have not gone beyond the maximum amount of 401K and health contributions and variable spending accounts.
- Perform account payable practices audits to confirm fringe benefits and other payroll-related accountabilities are not documented in place of the form W-2.
For tax filings, the tasks include:
- Reconcile taxable wages and taxes for all departments to make sure that general ledger accounts are balanced at the end of the calendar year.
- Update all special tax items so fringe benefits, third-party sick leave and pay, and corrections are included before doing the final payroll of the year.
- Check the deposit change frequency notifications. Upon receiving an advice from the tax agency to change your deposit frequency, see to it that all relevant details are updated in the payroll system. This will guarantee that the new tax year’s deposit frequency is correct.
Computation of Payroll
In payroll and tax processing, seamless computation is necessary. Computation depends on your business and State or Local laws. However, these guidelines may help if you are still using internal staff for payroll services.
- Compute the gross pay of your employees. Use their wage rates and pre-arranged pay periods. This could be weekly, monthly, or twice-monthly.
Formula = Multiply hourly rate by total hours worked during the period.
- Remove Pre-Tax deductions consisting of health insurance plans, retirement plans (401K), Flexible Spending Account contributions, and life insurance plans.
- Deduct the FICA, income, and unemployment taxes. The FICA tax rate is equal to 7.65%—1.45% for Medicare. It is 6.2% for Social Security taxes. Other tax rates are determined by Federal, state, or local laws and your employee’s W-4. Employers do not match income tax deductions. However, they pay federal unemployment taxes.
- Finally, take out the voluntary deductions from the remaining pay. After all taxes and deductions, the remaining amount is the employee’s take-home on payday.
PCS Prostaff – Certified Solutions Provider
If you want the most efficient payroll and tax services, contact PCS Prostaff.
We have been in the business of providing for different business organizations in California and adjacent states during the last 20 years. As a service provider, it ensures ease of payroll processing as well as systematic management of company payroll.
You can always visit our company website to see our competencies and know the services that we offer. Or call us at these numbers 866-413-4103 during business hours to set an appointment with our HR and Payroll experts.
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