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Payroll Information |
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Let’s talk about payroll… If you employ one or more people, you are required to apply for accounts with IRS, the Colorado Department of Revenue, Colorado Department of Labor and Employment, Workman’s Compensation and perhaps the city in which your business operates. After you have opened these payroll accounts, the various entities will mail documents that by law must be posted "in a conspicuous place where employees may read". These posters may also be ordered from private companies that monitor federal and state requirements and send updates when the laws change. In order to ensure that you and your employees have a common understanding, it is wise for you to develop a basic "employee manual" that outlines vacation pay, sick pay, holiday pay, family leave, medical absences, pay periods, payroll dates and other company policies. After a copy of the manual has been given an employee, have them sign a document confirming that they received and read it. Place this signed document in their personnel file. All wages and reports are based on the day wages are paid rather than the date that the wages were earned. (ie: a payroll check issued on January 2nd is income for the new year even though the employee actually earned that money the year before. All bonus’ and commissions are subject to withholding taxes. The manner in which the amount is determined or the name of the compensation doesn’t change the fact the payment is to an employee and therefore taxable. All new employees must complete forms W4 and I9. Then you will do the following: Send a copy of the W4 to IRS and the Colorado Dept of Revenue if the employee claims more than 10 allowances, or exempt and earns more than $200 per week. Verify citizenship; complete Section 2 of the I9. (Failure to maintain an accurate I9 on each employee carries a $250 fine.) Fax the W4 to Directory of New Hires @ 303-297-2595 within 20 days – a national child support collection effort. (If your new employee has a child support payment problem, you will hear from the Family Support Registry and may have to withhold and submit to them a portion of the employee’s wages each payday.) Pay federal payroll taxes at your bank (941 deposit). Typically due monthly by the 15th day of the month following the payroll month; if the payroll tax amount exceeds certain limits, however, it must be paid within 3 days of the payroll date. File payroll tax reports quarterly: due the last day of the month following the last month of the quarter. If we are doing your bookkeeping, we will prepare the reports. Payroll reports consist of: 941 Report: a reporting of total wages for the quarter, federal withholding, social security and medicare withholding on those wages and the 941 deposits that you made. If the total 941 taxes are less than the current minimum for the quarter, payment can be made with the report instead of at your bank. Colorado withholding: usually paid quarterly with the report; if withholding amounts exceed specific limits, the withholding is reported and paid monthly by the 15th of the month following the payroll month. Colorado unemployment: paid quarterly with the report. The amount due is an assigned percentage on the first $10,000 in wages paid each employee annually. Federal unemployment: paid when the amount due reaches $100 (940 deposit), or paid annually with the report if less than $100. The amount due is .8% on the first $7000 in wages paid each employee annually. Occupational Privilege Tax: paid quarterly with the report if your business is located in Denver, Aurora or Greenwood Village. The employee pays a portion (which is withheld from wages), and the employer pays a portion. To calculate net payroll checks: Determine gross wages (minimum wage: $5.15 per hour) Calculate withholding amounts: 1. Social security and Medicare = gross wage x.0765 2. Federal = table amount from Circular E Colorado = table amount from CO chart 4. OPT ("Head") tax, for Denver, Aurora or Greenwood Village Look at W4 – married or single? # of allowances? find page for married or single find your pay frequency monthly = one pay check per month semi-monthly = 2 checks per month bi-weekly = a pay check every 2 weeks weekly = a pay check every week find gross wage in left hand column find column for # of allowances find withholding amount where gross wage line and # of allowances column meet on the chart Payroll example: Your only employee, John Jacob Jingleheimerschmidt earns $11 per hour. You pay every other Friday (bi-weekly). During this past pay period, John worked 78 ½ hours. Per his W4, he claims married, 4 allowances. Gross wages: 78.5 x11 = $863.50
To calculate 941 deposit: For the entire payroll month: total gross wages x .153 + total federal withholding 941 deposit amount 941 Deposit example: Total gross wages = $863.50 x .153 Social security 132.12 Federal w/h + 26.00 941 Deposit: 158.12 [ Return to Table of Contents ]
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