Here are things to do by a company/employer involved in the payroll process
Obtain an EIN (Entity Identification Number) from IRS if the company does not yet have one. Apply with form SS-4 on-line at the IRS web site www.IRS.gov
Obtain a business identification number from the State of Oregon. You can fill in the combined registration report on-line at the Oregon Department of Revenue web site www.oregon.gov/DOR, and then paper file the form.
Obtain workers compensation insurance (for job related injuries by employees) either from SAIF Corporation or through your own insurance agent.
Have your employees complete IRS form W4 (and W11 if applicable) and Department of Justice form I-9. www.IRS.gov
Paying your employees
You have 4 options for computing and paying payroll and payroll taxes:
-Manually - Using IRS and OR publications/tables, you can compute gross wage
and various tax withholdings, and the net paycheck. I have forms to track
employee pay history over time.
-Computer- Use QuickBooks or a comparable program. Once set up, you can
use the program to compute payroll checks, determine how much tax to pay,
compile employee data, and prepare various payroll reports.
-Outsource your payroll to a payroll service (e.g. Paychex) or to an accountant.
They will compute net payroll checks and payroll taxes to pay, and will
prepare W2s and required reports for the taxing agencies.
-Have a temporary agency "hire" your employee and be responsible for all of
the computation, paying, and reporting functions. This gets you completely
out of the payroll business.
Responsibility for Taxes
Both the employee and the company/employer are required to pay payroll taxes.
The employee "pays", via withholding from wages, Federal and Oregon income tax, Social Security and Medicare tax, and workers compensation assessment.
The Company/employer is liable for Social Security and Medicare tax, State unemployment tax, and workers compensation assessment and premium.
Paying Payroll Taxes
IRS and Oregon require that the sum of employer taxes and the taxes withheld from your employees be paid timely. They will assess penalties ranging from 10% to 100% of the taxes due for late payment.
Required payment due dates vary with the amount of payroll taxes due:
If total taxes are less than $1,000 annually, you may pay once, at year end.
If total taxes are less than $2,500 per quarter, you pay at quarter end.
If total taxes are greater than $2,500 per quarter, you pay monthly via EFTPS system.
Unless annual combined (employer and employee) payroll taxes are less than $1,000, you are required to file IRS and Oregon payroll reports quarterly. At year end, you are also required to provide your employees and Social Security Administration with W2 forms.
What does it cost?
Costs will vary depending on the # of employees and how often you pay. If you have the time, inclination, and ability, the manual preparation is least costly. QuickBooks payroll system costs $200 annually. Paychex monthly cost for 3 employees paid twice monthly is about $100. Some accountants are less, some are more than that. A Temp agency would be the most expensive.