graphic of 12 steps of payroll checklist

Your 12 Step Payroll Checklist [Free Download]

Before you run payroll, go through this 12-step payroll checklist to make sure you have everything ready to pay your employees.

Download Your Free Payroll Checklist

o   Apply for an Employer Identification Number (EIN).

To report employment taxes, you’ll have to have an EIN. You can easily and quickly apply for an EIN online.

o   Apply for your state identification numbers.

Your state may also require you to apply for an identification number to record your employment taxes and unemployment tax.

o   Choose a pay schedule.

Choose pay periods and a pay schedule that works well for your company and employees.

o   Make sure your new employees are legally allowed to work in the U.S.

Ensure that all your new employees are legally allowed to work in the country. Use Form I-9 to verify your new employees’ identities and employment eligibility when they first start working for you.

o   Make sure you withhold the correct amount.

You’re responsible for withholding income tax from your employees’ paychecks. To determine how much federal income tax to withhold from each paycheck, have each employee complete Form W-4 when they first start working for you.

Encourage your employees to complete a new W-4 whenever their situation changes, like if they get married or have a child.

Each employee will have to complete your state’s version of a W-4 so you can properly withhold state income tax.

o   Add new employees to your payroll system.

Once you’ve collected your new employee’s address, social security number, and withholding allowances, add the new employee to your payroll system.

o   File a new hire reporting form with your state.

For each new employee, you’ll have to complete and file a new hire reporting form with your state’s Department of Labor. You’ll often have to complete these forms within 20 days of hiring your new employee, but check with your state.

o   Keep track of how many hours your employees have worked.

If you pay your employees hourly, you’ll have to make sure you’re tracking their hours each pay period.

At the end of each pay period, make sure to make any necessary adjustments and keep track of any personal time off (PTO) your employee has used.

o   Give yourself plenty of time to process payroll.

Make sure to give yourself a couple of days to process payroll. This gives you time to print a report before printing paychecks or finalizing payroll to ensure everything is correct or to make adjustments.

If you’re running automatic deposit, find out how far in advance you must run payroll to ensure it lands in your employees’ bank accounts on payday.

If you’re printing physical paychecks, print them in advance to ensure the information is correct and to give yourself some time in case something goes wrong, like your printer not responding.

o   Print paychecks (or initiate direct deposit) and print paystubs.

o   Print payroll registers.

Print a payroll register to show your employees’ gross and net wages, including withholdings and deductions. Keep this information in a confidential and secure area.

o   Know your payroll tax obligations.

As an employer, you’re responsible for reporting and depositing your employees’ federal income tax and the employee and employer shares of social security and Medicare taxes.

To report these taxes, you’ll either file quarterly, using Form 941 or annually, using Form 944. You’ll also have to deposit the funds withheld, either monthly or semi-weekly.