How To Do Payroll Yourself in 8 Steps (+ Free Checklist)

Cody Cromwell
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The 8 Steps To Small Business Payroll

The steps to small business payroll are simple enough that you can create a payroll package for your small business that will cost you less than one cent per employee, after taxes.

The steps are:

  • Enter client records into Accounting software
  • Generate a payroll schedule
  • Analyze payroll using essential payroll calculations
  • Transfer payroll information to HR information system
  • Pay employees
  • Analyze payroll withholding tax records (W-2)
  • Implement payroll taxes
  • Analyze payroll taxes
  • Transfer payroll taxes to employees

If you’re an accounting student looking for a good summer internship, or a small business owner looking for ways to become more efficient, you’ll find this checklist invaluable.

I’ll walk you step-by-step through all the accounting basics you’ll need to do payroll work for you and your employees. The checklist includes a comprehensive list of calculations you’ll need to make for payroll, a tax guideline with all the tax calculations you’ll need to learn, and a glossary of terms.

You will apply your payroll skills in a real world business situation, learn how to use QuickBooks, and learn to prepare payroll for your small business.

Set Your Business up as an Employer

Establish Your Payroll Process

You will need to communicate with your accountant to establish how payroll will be set up and what payroll due dates are. Depending on your accountant, it’s likely that you will receive copies of your W-2s, 1099s, and other forms. You have the option to receive all of these via email, so make sure you check to see what you need to do.

Communicate with Your Employees

You will need to communicate with your employees to ask them to submit all of their W-2s and 1099s, request 1099s for people you may not know, etc. Ask your support staff to print copies off of their computers for you as needed.

Review Your Records

Once you receive copies of all your W-2s, review them to make sure everything looks correct. Correct any mistakes you notice.

Determine Form 1099-Misc Payments

If you have received Form 1099-Misc payments, determine how you’re going to calculate your expenses.

Define and Establish Pay Periods

You will need to determine how frequently you will pay your employees for their payroll taxes, so choose a pay period.

Get at Least 20% of Your Employees on Board with Direct Debit

In order to get this process started, get at least 20% of your employees to sign up for direct debit.

Collect Your Employees’ Payroll Forms When Hired

Are you hiring employees? Easy! Ask your new hires to fill out a payroll form and make sure they fill it out themselves. It should look something like this:

  • Sector 1 – Name on the check
  • Sector 4 – Name on the check
  • Sector 5 – Name on the check
  • Sector 6 – Name on the check
  • Sector 7 – Name on the check

SECTION 1 – TOTAL HOURS. Enter daily hours, or …

SECTION 2 – SALARY. Enter pay rate, or …

SECTION 3 – TAXABLE. Enter tax rate

SECTION 4 – PENSION DEDUCTION? …

SECTION 5 – HOME INCOME. Enter gross income earned

SECTION 5 – NET TAXABLE INCOME. Subtract expenses, then figure as net

SECTION 6 – AGI. Add wages & self-employment

Collect Timesheets, Review & Approve

If you have employees, you’re going to need to do payroll.

You’ll need to track the hours of work and wages for each employee on your company’s timesheets. When a week ends, you’ll compare the hours worked by each employee to their timesheet and pay them their wages by reviewing and approving their time cards.

The whole process of tracking hours and wages is known as payroll. There are a few steps you’ll have to take in order to complete it yourself, although the basic steps are fairly simple.

Simply collecting, processing and crediting your employees’ hours worked and wages earned is one of those times when doing things yourself is a must. There is just too much money on the line to turn it over to an outside company. And that’s especially true if you own a small company and know that you can do it all yourself.

Here are some of the most important steps to take before performing your own payroll.

Itemize Wages

Collect your employees’ timesheets by reviewing each employee’s timesheet for the week and entering all the hours worked and wages earned into their timesheet.

Do Payroll Calculations

Yourself: Payroll Basics

Every year (every once in a while, if you’re very good), you’ll get to do a little bit of payroll. At the very least, you’ll need to prepare quarterly and annual reports. You may also have to do a few payroll calculations here and there.

If you want to do payroll for yourself, you’ll need to develop a few skills. No doubt, it’s a little more complicated than using Quickbooks, but you’ll find that after a little time in the saddle, you’ll realize that the effort is well worth the time.

The good news is that if you have the hang of a couple of terms and concepts, you should be able to do payroll yourself in about 8 simple steps. Using our 8 step outline below, you can begin setting up your payroll system and get it running smoothly.

Pay Employees, Tax Agencies, Benefit Providers

And Yourself Faster and Easier.

Payroll is a painful process that seems to rise every year. As an owner, how can you cut payroll expense and save money? You can lower your labor costs by doing your own payroll.

Are you the owner of a small business? If so, you probably have your hands tied with payroll and taxes. You might not even know where to start when it comes to figuring out how to do payroll. You might think that you need to hire a payroll company or an accountant to do payroll for you or handle taxes for you.

You don't need to go that long way. You can do it yourself.

In this piece, we would be showing you Five smooth ways of doing your own payroll for your small business. By doing it, you will be achieving a work time and money flexibility, and you will cut the overhead costs of your business.

Document & Store Your Payroll Records

These days, payroll is almost exclusively handled by outside payroll services, but that doesn’t mean you shouldn’t be able to take care of it on your own. Even if you’re not an accountant, you can still manage the details of your payroll process.

There are plenty of helpful payroll worksheets, forms and paperwork to help you manage the financial side of your business, and it’s not as hard as it sounds .

Take care of all of your payroll related paperwork, invoice your payroll service to get paid, payroll taxes and pay your employees. …that’s all there is to doing your own payroll without the hassle of doing payroll yourself.

Every year or two, run a quick tally to make sure it’s correct and update your timesheets.

Most employers use a QuickBooks payroll service or payroll software. However, there are also plenty of free time tracking and time billing apps and programs to help you manage your time. If you’re not a naturally good time manager or rule follower, you can use software programs to keep track of your time spent on projects or specific tasks.

Do Year-End Payroll Tax Reports

Staying organized during the tax season can be one of those things that is so hard to do. Especially if you are busy with your regular work. It is also often a tax season reality that you do not have the time to do your yearly payroll.

Here is a great 7-Step Checklist for checking your yearly payroll and doing your payroll reports/year end reports in a quick 8 Steps.

First you will need to do a year-end payroll report. This will give you an estimate of how much you owe for payroll taxes in the current year and also in the next year.

Second you will need to file for a payroll tax exemption for the current year. This is done by filling out form 843 and you will need to mail the paper form to the tax office.

After that you will need to go to your employer (if you are self-employed) and do a year-end payroll. This is the only time you will be allowed to request a different method of payment than what you were paid.

Finally you will need to make a copy of all the documents you had to work with for the year-end payroll. This includes the employer 1099, medicare insurance form, regular W2 or 1099s, and all extra payments (consolations, bonuses, per diems, etc.).

Free Small Business Payroll Checklist

Although you want to do your own payroll, there are some important steps you shouldnt forget and should only be done by the expert. You could easily get stuck avoiding a lot of red tape and losing a lot of money if you don't have a good understanding of payroll and taxes.

If you're starting your own small business, payroll is a cost of doing business you can’t afford to ignore. Fortunately, there are numerous resources available online to help you with the process. The following resources are the simplest and most straightforward guides to starting your small business payroll.

How To Do Payroll With Excel

How To Do Payroll With Software

Payroll traditionally involves manual work; you have to enter data, check figures, and fix errors that are part of office life. And while there are times when your payroll department can fix errors or inquiries for you, there are also times when sending the information by yourself is the only option. In order to take care of routine and less complicated paychecks, many small businesses hire an outside payroll service provider.

Though there is no way to do payroll yourself, if you have the time and the data, you can do it the old fashioned way. Today, there are companies that offer online payroll software, and the benefit is that you don’t even have to do math or problem-solve, unless you want to. And because you…re going to submit your figures to your HR consultancy anyways, you may as well go digital.

How To Do Payroll With QuickBooks Payroll

How To Do Payroll With Gusto

We all know that companies save money on payroll tax by hiring independent contractors (the "not my job" crowd) instead of employees. Here's how to get more than the minimum for your tax dollars by doing your own payroll.

Start by reading this short book, Accelerate Your Business by Outsourcing Payroll, which will show you how simple the whole process is. Next, get your paperwork together.

You will need to complete Form W-4 (for the IRS), Rev. Code 4427 (for state), a copy of your last year's income tax return (You can do your own taxes, or you can use Turbo Tax.) Also get your W-2s for your employees. Lastly, be sure to save all prior years' W-2s so that you have them all in case you are audited.

By keeping them organized and easy to access when it comes time to prepare your payroll, you will find payroll to be a breeze!

Getting Check and Deposit Information From Your Employees

The first step in your end-of-the-year payroll is to gather as much information from your employees as you can. The simplest way to do this is to send them a checklist every week or two that asks them to answer a few important questions on your POS system:

How To Do Payroll With Patriot

Welcome to a series of short tutorials that will walk you through the process of setting up accountant software with the use of free online tools. Here, we’ll cover Patriot Software’ brand new payroll software, which we’ll be using for this tutorial, but any payroll software will work if you’re using free online tools. This will be a step by step tutorial that you are free to use and share with others. By teaching others to teach themselves, we are empowering those who are seeking financial wellness.

How To Do Payroll With OnPay

Taking care of your payroll involves a lot of payment and recording methods and companies usually outsource this task to experts. Therefore it can be a bit tricky to understand your company’s payroll process on your own.

Luckily, you can outsource your payroll to OnPayroll, a cloud accounting service that lets you put your bill-paying skills to the test. Here’s how to manage your payroll on your own and save time:

  • Step 1
  • Identify Your Cash Method

Before you can start using OnPayroll to manage your payroll, you need to determine which cash method(s) you’ll be using in your business. If you’re new to payroll, you’ll probably want to use your traditional bank account as your primary cash method. For those who don’t have a separate bank account for their business yet, there are other options available, such as payroll cards (more on this in Step 3) and payroll checks (which we’ll cover in Step 4).

Frequently Asked Questions (FAQs) About How To Do Payroll

Since doing payroll yourself is a rare and out-of-the-ordinary thing, most often there will be a lot of questions that pop up in your mind, and as you go through this post, you will find answers to many of them too. This post has been structured according to the 8 steps that you need to take to make payroll easier for yourself.

{1}. SAVE MONEY ON INCOME TAX
{2}. SAVE TIME & DO IT YOURSELF
{3}. MAKE PAYROLL EASIER FOR YOUR EMPLOYEES
{4}. SAVE MONEY ON AUTO INSURANCE
{5}. SAVE MONEY ON HEALTH INSURANCE
{6}. SAVE MONEY ON RETIREMENT
{7}. SAVE MONEY ON TAXES

What Are the Risks of Doing Payroll Without Software?

According to a recent Paychex study, 70% of payroll processing tasks are repetitive. HR departments are spending more and more time each year on repetitive tasks. Payroll is one of those processes. If your company is already using enterprise software but still manages payroll in-house, you are increasing your personal risk for errors and errors in payroll.

You don’t have to be a computer wiz to handle payroll. There are payroll software programs and an online payroll application that can help you get this important job done more quickly and more accurately. The application has pre-designed forms and is customizable and integrates with your overall financial management system. HR Managers can use the application to verify pre-tax deductions and to enter data for W-2 forms that arrive in the mail.

Payroll is a skill that will help you grow professionally and one that every HR Manager and small business owner should handle. How to do payroll yourself doesn’t have to be expensive and it doesn’t have to be difficult or time consuming. It should allow your employees to file quickly and easily.

Though the process is fairly simple, you should take the time to understand the overall flow of the process. Doing payroll yourself may give you the freedom to customize the application how you need it to work.

What Are the Most Common Mistakes Made When Doing Payroll?

What Happens if I Make a Mistake Doing Payroll?

If you make a mistake in doing your payroll incorrectly, you could end up owing taxes or having to pay back money to your employees’ paychecks. It’s devastating when this happens, but hopefully, you won’t make a mistake.

Your payroll taxes are your responsibility, so it’s extremely important that you complete them correctly and on time. If you are having trouble, check out these 8 steps for doing your payroll yourself while avoiding the many payroll errors that can land you in trouble.

Bottom Line

If you're a small business owner, it's a good idea to know how to do your own payroll. Payroll for a small business can be complex (for example, it can involve personal income tax withholding for multiple employees). It's difficult to find an accountant to help you with a simple payroll setup or one who specializes in off-the-shelf solutions like QuickBooks. In addition, it can be hard to justify the cost of an in-house payroll specialist.

If you have only one owner, and if your business is just a few employees, then you don't need to worry about payroll specialists. You might want to hire one if your business is growing too rapidly, since those specialists typically charge by the hour. However, most small business owners can handle payroll paperwork themselves. You can even do it on a budget if you have a little time. If you want to do it yourself, though, consider making it a team effort as well as spending the necessary time to ensure that the payroll system works well for your business.