Payroll processing is one of the most tedious and sometimes dangerous aspects of operating a healthcare company. The potential for significant harm is obvious, as 17% of workers have said they would leave over a single late or erroneous payment. The Internal Revenue Service punishes 40% of small and medium-sized firms annually for payroll tax violations, which may be very expensive.

Many company owners of smaller healthcare establishments lack the knowledge to handle payroll on their own, despite its critical nature. Let us assist you in any way we can.

Here is a detailed explanation of how to handle payroll for your healthcare company. We’ll also discuss why it’s smart to spend money on a reliable payroll solution.

Get employees form

First, have everyone in your staff fill out a W-4. Form W-4 is used to verify an employee’s tax status and maintain tabs on any deductions or credits that may apply to their paycheck. The number of dependents an employee claims reduces the amount of payroll taxes withheld from their paychecks. A new hire report must be submitted for each employee who has been hired. When hiring new employees in 2020, please note that a new version of Form W-4 will be in effect on January 1, 2020.

Get EIN

The second step is to acquire or register for a Federal Tax ID for your healthcare business. Be prepared with your EIN before attempting to handle payroll on your own. The IRS requires all businesses and those who pay workers to have an Employer Identification Number (EIN), which functions similarly to a Social Security Number (SSN). The resources for employers in your state may tell you whether you need a state EIN number as well.

Settle on a pay cycle

After you’ve figured out how to file your healthcare company and employee taxes, you’ll need to select how you’ll compensate your staff. Weekly, bimonthly, semiweekly, and monthly pay periods are all possible. There are benefits to each of the four timetables.

Paying staff on a regular basis is important, but you shouldn’t let too much time pass between paychecks. It’s recommended that you set up 15-30 minutes to research the relevant state legislation governing your payroll schedule.

Read more: How to Use Tax Software?

Figure out gross salary

Gross pay may be easily calculated simply multiplying the number of hours worked by the hourly rate for the pay period in question.

Time spent at work may be easily monitored with a simple spreadsheet. The gross compensation for a given time may be calculated by taking the total number of hours worked for that period and multiplying it by the employee’s hourly rate. All of the procedures outlined here have to be carried out for each worker at your healthcare company.

A simple illustration is as follows:

A worker has put in 85 hours of effort during the pay period and is receiving payment of $10 per hour. The number of hours in this pay period is 80.

For example, let’s say that you put in 80 hours and were paid $10 per hour.

Five more hours of work at $15 an hour would net $75.

Total Compensation = $875

If you use a spreadsheet to compute the gross compensation for your workers, you can probably do the math in under a minute. The time and effort required to manually compute the gross compensation for each person may soon mount up if you have a large workforce.

Pay Your Staff

Make sure all workers get their net pay on the appropriate day according to your payroll plan, whether by direct deposit, paper checks, or any other method you and your employees have agreed upon for payment.

Furthermore, most jurisdictions mandate that companies give workers with a pay stub detailing any applicable deductions. To find out what is expected of you, visit the website of your state’s department of labor.

Keep meticulous records of every paycheck, no matter where you reside (who it went to, the amount, when it was issued, etc.).

Paying payroll taxes

Paying taxes to the government is a major milestone. It’s not always clear which tax forms a company has to file in a given situation, so let’s break it down.

The amount you owe in payroll taxes during the “lookback period” determines how frequently you must make payments to satisfy those taxes. When filing taxes with the IRS, your “lookback period” will change depending on whether you utilize Form 941 (“Employer’s Quarterly Federal Tax Return”) or Form 944 (“Employer’s Annual Federal Tax Return”).

If you own a healthcare company, you probably need to fill out Form 941. Form 944 is used only by taxpayers whose yearly federal tax burden is less than $1,000 or who have been instructed to do so by the Internal Revenue Service. If you file using Form 941 the “lookback period” is the 12 months prior to June 30. The 2020 fiscal year’s lookback period, for instance, would include the time from July 1, 2018, to June 30, 2019.

• Payroll taxes are due every month if your total payroll taxes for the lookback period were $50,000 or less, or if you are a new employer who did not have any workers during the lookback period. Pay your taxes by the 15th of the month after their due date.
• Payroll taxes are required to be paid semiweekly if the total payroll tax liability for the lookback period was greater than $50,000. For payrolls processed on a weekend, Monday, Tuesday, or Wednesday, the following Friday is the deadline for submitting payroll taxes. Payroll tax payments received on a Wednesday, Thursday, or Friday are due the following Wednesday.
• If your payroll taxes total $100,000 or more after processing a single paycheck, you must make a deposit the next business day and keep making deposits the following business day for the duration of that year and the following year.

Always double-check your calculations just before the new year begins to be sure you’re on the correct track financially.

Payments for FUTA and SUTA taxes are the only payroll taxes not included here . Due date for FUTA is the 30th day of the first month after the quarter’s conclusion. You should check your state’s website to confirm the frequency of SUTA payments, although in most places, they are due every three months.

Total payroll tax you have to pay

Here is how much you need to put aside for payroll taxes when the time comes:

• All federal, state, county, and local income taxes that apply to the employee’s paycheck (see Step 4).
• The Federal Insurance Contribution Act (FICA) taxes that you withheld from your employees’ paychecks (see Step 4).
• Employer’s share of Social Security and Medicare contributions (FICA) (equal to the FICA amounts you deducted from employees).
• Your federal unemployment tax liability (FUTA). The rate is 6% of each worker’s first $7,000 in taxable earnings per year if SUTA is not paid (more on that below). This percentage drops to 0.6% if SUTA is paid.
• The state unemployment tax bill that you’ve racked up (rates and wage bases vary).

Methods of making timely payroll tax payments

The Electronic Federal Tax Payment System allows for the payment of federal payroll taxes electronically (EFTPS). You may pay the taxes you owe to the government at the state, county, and municipal levels by visiting their respective online payment portals.

Read more: The Pros and Cons of Filing Jointly

File payroll tax reports

Payroll tax reporting to the Internal Revenue Service is the last stage. The details are as follows:

• Employers must file Form 940 (“Employer’s Annual Federal Unemployment (FUTA) Tax Return”) by January 31 each year for the prior tax year.
• The final day of the month after the end of each quarter is the deadline for filing Form 941, the “Employer’s Quarterly Federal Tax Return” (e.g., April 30 for Q1).

Follow the directions on each form to print and submit them by regular mail to the IRS, or use the IRS’s e-file service to submit them digitally.