Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 5 down vote favorite
1

I have tried (and been rejected by) a few online payroll solutions. As I am about to start (very soon) working with real employees, I need to find a way to do payroll more or less manually (though I will eventually be automating the process—I am a programmer, after all).

My business is located in the State of Georgia, and to keep matters simple, for the time being, I am only going to hire employees in the State of Georgia. While answers to this question with federal information are acceptable, those with answers that cover Georgia would be divine.

Insofar as federal requirements, I am aware of the following (for the 2012 year):

  • The Corporation must pay 6.2% on top of an employee’s salary for social security tax for the first $110,100 of an employee’s salary.
  • The Corporation must withhold 4.2% from the employee’s salary for the employee’s part of the SS tax for the first $110,100 of an employee’s salary.
  • The Corporation must pay 1.45% on top of an employee’s salary for medicare tax.
  • The Corporation must withhold 1.45% of an employee’s salary for medicare tax.
  • The Corporation must pay 6.0% on top of the employee’s salary, for the first $7,000 of the employee’s salary, for FUTA.
  • The Corporation must withhold Federal Income tax according to the tables and methods presented in IRS Publication 15, IRS Publication 15-A, and IRS Publication 15-B. I believe that I understand the tables sufficiently enough to write a function to compute this part of the withholding for an individual, but it seems to essentially amount to withholding up to 35%, depending on the bracket and whether certain IRS rules have been triggered.

So, to use an example of an employee that is making $20 per hour for 40 hours, is single, claims no withholding allowances, and is paid every two weeks, it would seem that:

  • The Corporation pays 6.2% + 1.45% + 6.0% = 13.65% in taxes on top of the paycheck. If the paycheck is $1,600, the amount to remit for the corporation’s part of federal payroll taxes is thus $218.40, correct?
  • The Corporation withholds 4.2% + 1.45% for social security and medicare, thus $90.40.
  • The Corporation withholds $187.15, plus 25% over $1,442, which works out to $226.65.

Therefore, for federal only, it seems that the corporation pays $218.40 of tax, while the employee pays $317.05 of tax. Am I good so far?

Now the real confusion begins for me, for state processing.

With the State of Georgia, I have:

  • Registered my Corporation.
  • Registered with the Department of Revenue and received a withholding account number.

I have not:

  • Figured out how to compute or remit state unemployment tax.
  • Figured out how to compute or remit state workers’ compensation tax.
  • Yet registered with the state for sales tax purposes, as I sell no taxable goods (I solely provide services; anything that I have to purchase for those services is submitted to my client for reimbursement, but the original vendor collects the sales tax, I do not).

I have a document that shows me the tax tables, and they are structured along the same lines as the Federal tables. So for the situation above for GA it looks like I withhold $84.22 in state income tax. Assuming that is correct, then I understand GA’s withholding requirement, at least there.

But I believe that I have to provide for other things, too: workers’ compensation, state unemployment tax... is there anything else?

And the $100,000 question: where do I go to find concrete information on this stuff? For SUTA, I found the Georgia Department of Labor Web site for Employers, but I really don’t seem to be finding the information I need there. Do I remit WC and SUTA along with other withholdings, in the same way as Federal? Or do I have to do something special there?

Also, one other thing: We do not run Microsoft Windows; we are a Linux shop. Please do not suggest software unless it works directly on Linux systems without a virtual machine or emulator or Wine or similar. Thanks for any help!

share|improve this question
I have tried (and been rejected by) a few online payroll solutions Which ones? – Karlson Mar 29 '12 at 16:34
SurePayroll and its parent, though I don’t recall the name of the parent. – Michael Trausch Mar 29 '12 at 16:39
1  
You have missed the entire payment part of payroll. You have to pay the federal taxes and the state taxes by very specific dates, and the dates vary depending on your total payroll amount. If you miss the date by even a day there are large fines. You really need to find a service to do this for you. – Gary E♦ Mar 29 '12 at 16:52
1  
Have you looked for an SBDC office in your area. They would be able to help you with state specific information and their services are free. – Justin C Mar 29 '12 at 18:06
2  
If you were willing to use a service, why not hire a bookkeeper who can setup payroll? – JeffO Mar 30 '12 at 1:38
show 2 more comments

6 Answers

up vote 3 down vote accepted

I would strongly recommend that you look into payroll services companies like:

Or find an accounting firm that can do the payroll for you or talk to the bank where you have your account as most of them offer payroll services as well. E.g. Bank Of America. Trying to find and do this on your own will cause you more grief then it's worth.

share|improve this answer
While I appreciate your input, it does not actually answer my query. Thanks, though. – Michael Trausch Mar 29 '12 at 16:36
Additionally, neither company (most of them) don’t publish rates. I need costs to be very controlled here, and rates e.g., like SurePayroll’s would be nice. If their rates were similar, I am sure they would be published. That is: If they do not publish their rates on their site, they are likely too much for me to worry about. – Michael Trausch Mar 29 '12 at 16:38
I wound up going with a front-end to AccountantsWorld located here in GA… I ultimately plan on doing payroll in-house someday, but right now I just don't have the time to create the system(s) that would be necessary to do it confidently. Ergo, I am accepting this answer… thanks! – Michael Trausch Jun 2 '12 at 18:31
@MichaelTrausch Any time. :) – Karlson Jun 2 '12 at 23:21
up vote 3 down vote

So, first of all, get a copy of the Employer's Tax Guide (Publication 15 from the IRS). That will point you to the frequency with which you have to make filings of withholding and employment taxes. Also, look at the paperwork that came when you got your EIN -- it will tell you what federal forms you need to file, and when.

Secondly, Federal Unemployment Tax works hand-in-hand with State Unemployment. If I recall correctly, the federal tax is reduced by amounts you pay into the state system. Check with the Georgia Department of Labor about paying their unemployment -- see http://www.dol.state.ga.us/pdf/forms/dol4e.pdf .

Third, you asked about workers compensation. Workers Compensation insurance is usually provided by private entities who you contract with, not by a state agency.

There are a few other payroll issues that you haven't mentioned, which you may need to consider: (1) reporting -- you will need to issue form W-2s to your employees, (2) benefits -- these are sometimes reported on form W-2, (3) garnishments -- sometimes employees have their wages garnished by court order or administrative action.

If you're a one-person shop, dealing with your own payroll isn't a huge deal. But, it gets substantially harder when you start adding people. And that's why most people deal with a payroll service provider.

share|improve this answer
up vote 1 down vote

Talk to a very small business you know and ask what service they are using. If they are not using a service they may be able to give advice.

You are taking a risk by going forward without an expert. The deadlines and requirements are non-trivial, and if you mess them up their are penalties.

Talk to the Georgia Small business development center for other ideas.

share|improve this answer
up vote 0 down vote

You don't say why you were rejected. But my short answer is to not even consider DIY payroll processing. I know lots of people who have no employees other than themselves that still use online services for payroll. So, without some compelling reason that you would be rejected from all of them I can't see any reason to try and do this yourself.

The rules are just too complicated and variable and the penalties too severe to try and do this on your own. Remember that you aren't just going to have to write the checks to the employees and the government. You are also going to have to submit the W-2s and other tax forms.

This is the epitome of the kind of thing you need to outsource.

share|improve this answer
(Personal) credit was the reason for rejection. – Michael Trausch Mar 29 '12 at 20:47
up vote 0 down vote

You might consider the route I've taken with a couple corporations. Get ahold of PPC Payroll Deskbook (DVD or online) and a standalone payroll program. I suggest CFS 940/941 Payroll and their W-2/1099 program as well, taxtools.com. The other program that is very nice is by Pensoft (they have several different versions with increasingly more functionality). You only need one or the other. Both will keep you compliant with Fed and State forms given you also arm yourself with the knowledge a CPA possesses on this topic (via PPC Payroll Deskbook and Fed and State tax authority publications as others have cited above and below) and provide a nice organized way to fill things out and keep organized. PPC Payroll Deskbook is an authoritative source, but be warned it does not cover state, just Federal. I choose to run payroll after-the-fact. Payroll is either done after-the-fact or live. Now that I think of it, a less expensive program, but one which does not handle Federal Form 944 is Medlin Payroll. Figuring out payroll was tough at first, but now I have the hang of it and am glad I took it back from the CPA. I have no affiliation with any of the companies mentioned. Lastly, if you get stuck and need some expert advice in a pinch, you can do as I've done in the past and use justanswer.com to ask a tax expert a question. Lots of CPAs hang out there. You have to know enough via a certain amount of study, a bit of a catch 22, to know if you're getting a good enough answer, but really, you should know anyway. You are responsible for payroll failures, regardless of whether a service is used. Some people don't realize that. The software I've suggested is Windoze only, but in this modern age we're all using VMs, right? Sure we are.

share|improve this answer
up vote 0 down vote

DIY payroll is a dangerous way to go. Not knowing why you are declined by payroll services, find a local accounting or bookkeeping firm that has experience handling payroll, tax-finings, W-2s, deductions, etc. I hope your comment about being a software developer doesn't mean you intend to write your own program!

What are you using for the General Ledger? Many have a payroll modual. In addition to the federal and star taxes you list, many municipalities have payroll taxes. What about workers compensation insurance insurance, too? Not a payroll issue, but required when you have employees in Georgia and most other states. Be aware that there are strict federal and state laws regarding exempt and non-exempt employees. You cannot pay everyone a salary, most (all, at first) of your employees will be hourly. You use have a way to track their hours (they sign the time sheets), even if they are exempt.

Do you see why DIY is not the best idea now?

It gets more complicated when you add employees in other states

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.