Everything You Need to Know About Doing Payroll in Iowa
How to Do Payroll in Iowa: Everything You Need to Know About Doing Payroll in Iowa
What is payroll?
Payroll is the accounting process of paying employees for their time. When you start your own business, one of your first steps is usually opening a business bank account with which to pay and deposit payroll funds. Most banks offer this service for free or at a low cost, but it’s not always a good idea. This is because there are penalties (sometimes up to $300) if you have too many transactions going through your bank account.
Who needs to do payroll?
In order to figure out whether you need someone to do payroll for your company, it is important to first determine whether you have any employees. If you have any employees, then yes, you will need a payroll service like ADP because the cost of doing payroll yourself will most likely exceed the fee charged by such a service.
Of course, if you are not self-employed and/or do not employ other people then having someone else do payroll for your business might not be necessary. However, just because some businesses don’t require a person at their side does not mean that one is not needed overall.
To start out, you will want to file a new employer report (EW1) with the IRS. For new hires, this process can be completed electronically.
At the same time, you will want to register with the Employee Eligibility Verification Service (EEVS) or Iowa Unemployment Insurance Program (UI). In order to do so, you’ll need information from your employees like name and social security number. Next, an employer identification number will have to be obtained through the IRS by filing Form SS-4. Lastly, if you are going as far as handling payroll for other companies besides yourself and/or subcontractors (if applicable), an employer identification number must be obtained for each company as well through the IRS by filing Form SS-4 for each company.
If you’re hiring help, it’s important to note the different tax brackets and deductions that your employees are eligible for. This can have a significant effect on how much money you will have available for the business at the end of the year. For example, an employee who is single and earns between $45,000 and $90,000 a year would be classified as single with two children (and two or fewer personal exemptions). The standard deduction they would receive is $6,350; add this number to your total taxable income. That means if your gross pay was $87,500 per year, then their federal taxes would be 25%.
What are some considerations for Iowans when doing payroll?
A number of considerations apply when it comes to paying your employees. Here are the most important ones:
1) You are required by law to withhold income tax from all payments you make to your employees;
2) You must submit wage and income reports with both federal and state agencies every year by a deadline set by each agency;
3) It is possible for an employee’s wages to exceed a personal exemption;
4) The laws that apply vary depending on what type of business entity you are forming. For example, if you form a corporation, then the payroll is paid by the company and any wages owed become corporate assets.
HR tools you might want to consider
The next thing you’ll need is an employee directory. With an HR system, your employees can see who their co-workers are and get information about other parts of the company. This allows for greater connection among workers and makes it easier to find a contact when needed. Your employer will likely want you to take this step and provides a link that goes into more detail about how to set up your directory here. After doing so, you’re going to want a system for payroll payments – maybe something like a check register or payroll calendar. One way is good, but the more ways people have of logging their hours the better, since it means nobody will be unsure whether they are paid correctly.
Every business needs an accountant, especially if you’re starting your own. So here are a few things you should know about doing payroll in Iowa!
In order for your employer to withhold federal income tax from your paycheck, the Form W-4 must be completed and turned in with the IRS Form SS-4. If a worker is classified as exempt, they are not required to complete a W-4 form. Exempt workers include doctors, lawyers, clergy members, and educators who receive more than $1,600 per week. An employee can sign a W-4 Employee’s Withholding Allowance Certificate at any time. However, it’s important to note that the form does not guarantee that all of their wages will be taxed at the lowest rate possible. It also doesn’t cover other deductions such as Social Security and Medicare taxes which may apply based on a person’s total income.