Congratulations on your decision to open a New Business. If this is your first business, you'll soon see that one of the more time consuming tasks you'll face is administering your payroll. Even if your company has only one employee, you are responsible for following Federal and State payroll regulations.

To help you get started, Paytime has assembled this package to provide an accurate overview of payroll procedures and summarize the major Federal and State guidelines. Although we intend to provide an overview of payroll and tax procedures, every business situation is unique and your accountant should review details of your particular payroll account.

Included in this package are the appropriate forms to assist you in applying for your identification numbers. We have also provided the addresses and telephone numbers of the Tax Agencies, should you have any additional questions.

A smooth running payroll is just part of the success recipe for your business. Preparing a business payroll on time and with accuracy is no small task. Paytime is happy to help you with any question or problem you may encounter.




PAYROLL PROCESSING/RECORD KEEPING



EMPLOYEES AND EMPLOYERS

Before you pay anyone for work they have done for your company, you must define the business relationship between yourself and the person performing the services, This relationship determines your responsibility for withholding and paying taxes based on those payments.

Generally, you must withhold income tax, withhold and pay social security tax, and pay unemployment tax on wages paid to an employee. Normally, you don't have to withhold or pay taxes based on payments made to an independent contractor. However, if you pay an independent contractor $600.00 or more during a year, you must file Form 1099-MISC, "Statement of Recipients Miscellaneous Income".

Most States have their own set of guidelines determining an Employer/Employee relationship, and they may vary from those of the Federal Government. You should check both sets before making a decision. Federal and State laws pertaining to minimum wage may overlap in some areas. The key thing to remember is that if both sets of laws apply, use the regulations which are more favorable to the employee. In other words if the minimum wage set by your State is higher than the Federal minimum, you must meet the State-Mandated minimum.

back to top



NEW EMPLOYEES

Every new employee must complete a Form W-4 "Employee's Withholding Allowance Certificate" as soon as they begin work. When completed by your employee(s), The W-4 provides you with the basic information required for payroll administration: Employee Name, Address, Social Security Number, Marital Status and Tax Exemptions. You will use this information to calculate Income Tax Withholding based on wages paid, tips, marital status, and special withholding allowances. Complete instructions for calculation individual Income Tax Withholdings are detailed in CIRCULAR E - Employer's Tax Guide.

For further information on Withholding Taxes, consult CIRCULAR E or call the IRS for Publications that explain withholding regulations.

back to top



MAINTAINING PAYROLL RECORDS

It is important to keep accurate payroll records for each employee. This information includes how much the employee was paid and how much you have withheld from their wages for Federal and State taxes. You will need this information to file quarterly and yearly reports required by the IRS, Social Security Administration and State Tax Departments.

Keep all records of employment taxes for at least 4 years. These should include:

RECORD KEEPING

Keep all records of employment taxes for at least 4 years. These should include:

• Your Employer Identification Number.
• Amounts and dates of all Wage, Annuity, and Pension payments
• Amounts of Tips reported.
• Names, Addresses, Social Security Numbers and Occupations of employees and recipients.
• Dates of employees' and recipients' employment.
• Periods for which employees' and recipients' were paid while absent due to sickness or injury, and the amount and weekly rate of payments you or the third-party payers made to them.
• Copies of employees' and recipients income tax withholding allowance certificates.
• Dates and amounts of tax deposits you made.
• Copies of returns filed.
• Records of allocated tips.
• Records of fringe benefits provided, including substantiation required under code section 274 and related regulations.

State and Federal Payroll Information for New Businesses

• FEDERAL APPLICATIONS AND TAX FORMS
  
  
• STATE REQUIREMENTS
  • PENNSYLVANIA