If you own a business and only have a handful of employees, doing your own payroll will probably save you a lot of money that you could put back into your business, if on the other hand you have employees in even the double digits you may not really want to take on this task yourself and you might find that the task is best handled by a professional payroll service. If you do decided to do it yourself here are the basics on how to do your own payroll.
Of course it will be necessary that all of your employees fill out their W-4 forms, remember this is required by the law and it needs to include their correct name, address and of course their social security number. They will also need to say if they are married and how many exemptions they may have. Make sure that the form is dated and signed by them and then you need to keep these on file in your business office.
The next step if for you to figure out their gross wages. If the employee is on salary you need to take what they make each week and use that as their gross pay and take the required deductions out. If they are paid by the hour you will just multiply the amount of money they make an hour by the hours that they worked that week, then take the deductions out. The sum of this will be their gross pay.
If there are some deductions that are voluntary such as a retirement fund to the employee you need to take these out of the gross pay before you do the mandatory reductions. This type of thing is considered non-taxable and they must be taken out before you do your tax deductions. What is left from that is what will be considered the gross pay and then you can take out your different required deductions.
So once any of the voluntary items are taken away from you take the statutory payroll taxes out and those would be the income tax and the amount you take can be found in the IRS Publication 15 or Circular E tax tables and it all depends upon how your employee filled out their W4. You will also take out state tax if your state requires it. You will also take out FICA Medicare. There may be other deductions depending upon where you happen to live.
Other voluntary deductions like regular savings plans, direct deposits, any kind of loan payments or tuition payments are not deducted until everything else is deducted. You will deduct these types from the net pay. These things must have the written authorization of the employee before they can be deducted.
Once you have done this, you will then have their total net pay and this is what your employee will actually receive on their payroll check.
It's probably a good idea if you use a payroll software package like Peachtree in order for you to do this with ease and to cut down on any errors and just make doing payroll a lot easier and quicker.