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Payroll? How difficult can it be? These were my questions when I looked at bookkeeping and payroll services business advertised both in the tabloids and more so on the internet. But then I remembered when I was still a student in my taxation class and when we were given a tax problem to determine how much is a person liable to pay when his gross income is this specific amount and guess what? Many times, I could not determine the correct amount. You see, there are many things to consider like income bracket, taxes withheld (if any), allowable deductions, exemptions, etc. See how tedious and cumbersome it is? That was one taxpayer. With a small business, that might be manageable. Now, think of a huge company with hundreds or thousands of employees to consider. It surely is a long haul. That is why these bookkeeping and payroll services abound in almost every city or state.

When I first came across this business, it perked up my interest in how payroll is processed, especially for a large company or corporation. I surfed the net, and I got a reasonably good idea of how it is done. For a business with 10 employees, it is possible to do it manually. Still, one with a hundred or more employees, then engaging bookkeeping and payroll services would be an excellent idea. Of course, you may opt solely for payroll services, but it would be best if the same group of people would do the bookkeeping and payroll service at the same time. It would be even better if this very same group handled the accounting and tax preparation as well. The less external services involved, the lesser chance of encroachment into your privacy. You would not want a takeover, would you? Especially by a rival company that has long shown an interest in acquiring your business. But that is going towards an extreme scenario, but it can happen, you know. But I digress, so let me go back to this payroll business.


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These are the steps on how payroll is processed. Sounds simple enough at first, but delving deeper into what it takes in every step is the tedious part. Here are the steps:

1.Establishing the employer identification number

This is supposed to keep your company within the watchful eyes of the Internal Revenue Service. If one government agency you do not want to mess with, this is one of them. Once you have your ID, the agency can track your business payroll taxes and check if you comply with the requirements. Mind you. The IRS means business- you would want to be in their good graces.

 2.Gather relevant information from employees

You can do this by making the employees fill in the appropriate forms like W-1, W-4, and I-9 for new employees. If the employment is a contract- based, the employee should fill-in Form 1099. There are also local forms which you will require the employees to fill in. It depends on your location or where your business is currently operating.

 3.Selecting a payroll schedule

You have a choice whether you want the payroll done monthly, semi-monthly, weekly, or bi-weekly. You have to study carefully about which one is best for your company. Naturally, it would be best if you had a good grasp of legalities regarding taxation and labor laws to be able to set the payroll up. If a selection has been made, it is recommended that you set up a calendar noting days for payroll processing and when the employees can get their money. Indicate also tax dates for quarterly filing and annual tax filing. Do not forget to ask your employees the preferred delivery method, whether they want it deposited directly or payment in check.

4.Calculating gross pay

Now comes the part where you have to deal with numbers meticulously- computing the employee’s gross pay. This is done by adding the number of hours an employee works in a given pay period multiplied by their hourly rate, which may vary according to where your business is operating. Never forget the overtime hours since every employee looks forward to this as a very good way to augment their wages. The law specifically provides for its computation as well as other monetary benefits prescribed by law.

 5.Determining deductions for each employee

This step is wearisome but you have to do it nonetheless if you want to accomplish an error-free payroll. It is in the interest of both your company and your employees that this should be the case. If your business is located in different states or countries, it is a must to know the laws which apply to workers in these places regarding deductions. Once determined, you can compute for deductions correctly. It is hard I know, but some things have to be learned and applied in the interest of fairness and justice.

 6.Calculating net pay and pay your employees

Now that gross pay is established, you can subtract the deductions. The remainder or what is left is the employee’s net pay, or take-home pay. This should be given to them through direct deposit, cash, or check on a schedule agreed upon or as prescribed by law. You can hold the deductions until the payroll taxes are prepared on an established schedule.


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Now that you are aware of these steps, wouldn’t it be great to relinquish these tasks to a team of experts in bookkeeping and payroll services? Why don’t you contact us now and experience the thrill of breezing through the urban jungle? We offer a wide variety of services that will cater all your needs and offer you excellent service! We guarantee excellence far beyond compare! Put your trust in us!