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):
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:
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:
I have 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!
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.
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.
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.
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
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.
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.
I really, really dislike "You should not do this" on StackExchange sites, and part of me wants to post this as a Comment other than the length limits, but:
We tried to do this ourselves. I'm also a coder that runs a business. It went very, very badly.
1. Payroll services provide certain guarantees to you that you cannot provide to yourself; in other words part of your payment to them amounts to an insurance plan in case something gets screwed up or you get audited. You can imagine this will never happen, and therefore coding this yourself was a great idea, money saved, but it's both unlikely that the cost to you in hours writing this is cheaper than the cost of just paying a payroll company, and if you do make a mistake, you'll lose double. Pooling your money with other businesses in the form of this payroll fee is a good move.
2. Tax law and bureau rules change constantly and it's complicated. Over here in CA, we have to deal with the IRS, the SoS, the FTB, the EDD, and a few other depts that handle Medicare, MediCal, UI, Social Security, and the more obvious Federal Income Tax and CA Income Tax. The schedule of forms each of these expects and the amounts paid:
a. Vary by state
b. Vary as laws pass
c. Vary as bureaus make decisions
d. Can even be so vague you just need a best-practices ruling and maybe even an "oh crap" fund to protect you in case that best-practices decision turns out to be a bad one.
For example the schedule of CA corp income tax filings has varied twice in just 5 years, was mostly based on arbitrary dept decisions, and the current version is a weird quarterly-like Frankenstein with arbitrary dates a month or so ahead or behind of a sane equal-parts quarterly schedule.
3. Tax law is structured such that money owed to you by the gov is generally inaccessible by you after 3 years, but money you owe is subject to things like 25% interest, fees, penalties, all with no expiry.
4. Many gov't departments require an obscure form you'll miss. When you miss them, they'll invent what you think you would have claimed on it, "estimating high to make sure you notice," then levy you for the invented amount. Money will just disappear based on a fiction they made up one day, and it will be up to you to file all the forms to get it back. You've got 3 years before it's gone for good. Good luck.
5. The government is not very electronic. Most depts regard email as "insecure" and require a fax instead. They often take a month to find the fax you sent them. In many cases mail is amazingly the only option - there's not even a fax option. Some things cannot be resolved without calling through several depts with hours of hold time. The chances of automating all of this are very low - at best you'd have a dept of people who take notifications generated by the system and go manually fax and mail stuff, and process incoming faxes and mail into the system. The cost of this is obviously way too high to bother.
So, it's not a good idea to do this yourself. The truth is Intuit has lobbied very hard to keep your taxes very complicated. The law and the government are not on your side. Unlike you as a designer of software, they don't think about usability and ease of access. "How complicated could it be?" Imagine a million rats diving into holes and your job is to go find them all, except the rats keep running while you go chase them down, and more keep popping up. Really damned complicated.
If I had to suggest the right way to do this oneself, it would be to start to assemble a company or a few competing ones that take on all tax issues for small companies, and begin to act as a counter to Intuit and the other big guys in the space. They can eat the large costs of dealing with bureaucracy and bad law making, some portion can go to lobbying to end it and gradually make themselves irrelevant, and we can start solving this problem. In the meantime it's a willfully horrible trap any idealistic businessperson is meant to fall into, hard.
So far we've found Zen Payroll to be the most coder-friendly option. Give them a look.