What is a Payroll Report?

by Jennifer Kiesewetter in August 13th, 2021

TLDR

  • A payroll report is a document that includes specific financial and tax information, including pay rates, hours worked, federal and state income taxes withheld, vacation or sick days used, overtime incurred, tax withholdings, and benefit costs.
  • Payroll reports are created for each pay period. Additionally, certain payroll reports are required to be filed with a federal or state governmental agency on a quarterly or annual basis. Companies of all sizes typically use payroll services, helping them stay on top of these reports and deadlines and other related compliance issues.
  • Payroll reports are generated for numerous reasons, including governmental filings and business insights. However, to remain compliant and keep frustration at bay, founders should understand the different standard payroll reports.
  • For federal quarterly reports, startups must file a Form 941, Employer’s Quarterly Federal Tax Return, which reports the income and payroll taxes withheld from your employees’ paychecks. These payroll taxes include both the Social Security and Medicare taxes withheld for each employee.
  • As an employer, you’ll also file a Form W-2 and Form W-3 annually for each of your employees. The Form W-2, Wage and Tax Statement, reports information about your employee’s wages, tips, other compensation, and taxes withheld over the tax year.
  • In addition to the required governmental reports, such as Forms 941 and W-2, depending on your payroll system, you can pull summary or detailed reports of your payroll, giving you insight into your business. For example, on a payroll summary report, you can see detailed payroll information on each employee, including gross and net wages, tax withholdings for that specific payroll period as well as year-to-date, and any other deductions, such as health or retirement plan deductions, indicating the employer cost-share as well as the employee’s.
  • When it comes to running a payroll report to calculate workers compensation, there are a few things you need to know. First, workers compensation is not deducted from your employees’ paychecks, like health insurance or retirement benefits. Instead, the cost of workers compensation insurance is paid wholly by the employer. Second, no matter what state you’re in, the cost of your workers’ compensation insurance is based on a percentage of your payroll.

No matter if you just launched your startup or if you’ve scaled into a more mature company, running payroll is a headache for many founders. Between calculating deductions, submitting your payroll tax to the Internal Revenue Service (IRS), and accounting for both state and federal wage and hour laws, many startup founders feel overwhelmed by the process, concerned about mistakes or non-compliance.

Once you understand the payroll process, however, much of the overwhelm disappears, and you’ll realize that you can garner valuable insights on your business from your payroll reports.

Keep reading to learn more about the in’s and out’s of payroll reports, how to complete them, and when and where to file them. We’ll also highlight some payroll reports templates for your review as you develop your startup’s payroll practices.

What Is a Payroll Report?

A payroll report is a document that includes specific financial and tax information, including pay rates, hours worked, federal and state income taxes withheld, vacation or sick days used, overtime incurred, tax withholdings, and benefit costs.

Payroll reports are created for each pay period. Additionally, certain payroll reports are required to be filed with a federal or state governmental agency on a quarterly or annual basis. Companies of all sizes typically use payroll services, helping them stay on top of these reports and deadlines and other related compliance issues.

What Are Some Types of Payroll Reports?

Payroll reports are generated for numerous reasons, including governmental filings and business insights. However, to remain compliant and keep frustration at bay, founders should understand the different standard payroll reports.

Federal Payroll Reports

Founders are responsible for completing and filing various federal payroll reports, both quarterly and annually.

Form 941 or Form 944

For federal quarterly reports, startups must file a Form 941, Employer’s Quarterly Federal Tax Return, which reports the income and payroll taxes withheld from your employees’ paychecks. These payroll taxes include both the Social Security and Medicare taxes withheld for each employee. You can file these forms through the U.S. Mail or electronically through the IRS’s e-File system.

The due date for filing your Form 941 is one month following the last day of the applicable reporting period. For example, your first quarter reporting covering January 1st through March 31st is due on April 30th.  The second quarter covering April 1st through June 30th is due on July 31st. The third quarter covering July 1st through September 30th is due on October 31st. Finally, the fourth quarter covering October 1st through December 31st is due on January 31st of the following calendar year.

If you don’t expect to pay more than $4,000 annually in wages, then you may be able to file an annual Form 944 instead of the quarterly Form 941. If this applies to you, you’ll need permission from the IRS before you file your first Form 944.

Employers must be aware that they could face penalties from the IRS if the Form 941 payroll form isn’t filed timely or with the correct information.

Form W-2 and Form W-3

Additionally, as an employer, you’ll also file a Form W-2 and Form W-3 annually for each of your employees. The Form W-2, Wage and Tax Statement, reports information about your employee’s wages, tips, other compensation, and taxes withheld over the tax year.

When filing a Form W-2 for all employees that worked for you over the previous tax year, you’ll also send a copy of the W-2 to the Social Security Administration (SSA), so they have a formal record of wages paid and taxes withheld.

Employers must send Form W-2s to their employees and the Social Security Administration by January 31st each year for the previous tax year.

Form W-3 is the transmittal form, showing all the totals for your Form W-2s. Like the W-2, completed Form W-3s are also sent to the SSA annually, only if you filed your W-2s on paper, instead of electronically. If you file your W-2s with the SSA online, you don’t have to prepare or file a Form W-3.

Note: Independent contractors do not receive W-2s reporting their wages. Instead, depending on the contractor and your business, they’ll more than likely receive a Form 1099.

State and Local Payroll Reports

Depending on where your startup is located, you may also have to file quarterly or annual payroll reports with your state or local government. For example, if you live in a state with a state income tax, you may need to file reports reflecting those withholding amounts. You’ll need to check with your state or local governments to confirm any filing deadlines.

General Payroll Reports

In addition to the required governmental reports, such as Forms 941 and W-2, depending on your payroll system, you can pull summary or detailed reports of your payroll, giving you insight into your business.

For example, on a payroll summary report, you can see detailed payroll information on each employee, including gross and net wages, tax withholdings for that specific payroll period as well as year-to-date, and any other deductions, such as health or retirement plan deductions, indicating the employer cost-share as well as the employee’s.

Additionally, depending on your startup, you can pull reports specific to certain employees, departments, or job titles, giving you more actionable data to use when growing your business.

How to Create a Payroll Report

When creating a payroll report, whether manually or through a payroll provider, you’ll need to be aware of several components.

First, identify the information you need from your employees required to run payroll. This will include the employees’ full names, birthdays, social security numbers, mailing addresses, and bank account information (if they choose to be paid by direct deposit). You’ll also need to verify their employment eligibility with a Form I-9.

Additionally, you’ll need to determine pay rates, such as hourly or salaried. You’ll also need to understand how your benefits work, i.e., how much of the out-of-pocket costs does your startup pay for health insurance vs. how much do your employees pay? Understanding this will help you calculate your necessary withholdings for employee benefits.

Finally, depending on where you are located, you’ll need to enter rate information for federal, state, and local taxes, as applicable. From this, you can create a basic payroll register showing gross and net pay and current and year-to-date withholding amounts.

Next, choose a time period. Do you want to examine your payroll report for a specific pay period, for the quarter, or the year, as examples? Again, the longer the period, the more likely you’ll spot trends that you can use in business decision-making.

Finally, input all of the data that you gathered above. If you’re not using a payroll service, you can enter this information into an Excel spreadsheet or template. Once your data is entered, you can start examining your payroll for trends and insights related to your startup.

How to Fill Out the Payroll Report for Workers Comp

When it comes to running a payroll report to calculate workers compensation, there are a few things you need to know. First, workers compensation is not deducted from your employees’ paychecks, like health insurance or retirement benefits. Instead, the cost of workers compensation insurance is paid wholly by the employer.

No matter what state you’re in, the cost of your workers’ compensation insurance is based on a percentage of your payroll. For example, here’s a basic formula:

Workers’ Comp Premium = (Annual Payroll/$100) x workers’ compensation insurance rate

Note that your annual payroll is based on your gross payroll before any deductions are taken.

Insurers will typically project your payroll for new businesses based on the number of employees and their pay rates. Then, once you have a fiscal year in the books, the insurer will look at your actual annual payroll, making any necessary adjustments.

As workers’ compensation varies from state to state, be sure to consult your state’s laws on calculations for your industry.

Payroll Reports Template

As you’re creating your payroll system for your startup, we wanted to share some templates that you can use, helping you to check off all needed information to pay your employees properly.

The first template shows the basic information needed for each employee when calculating their paychecks. You’ll note the personal information required in addition to the pay period dates, the income descriptions, and the deduction descriptions.

Source: SmartSheets

Next, here is a template that you can use to get permission from your employees to deduct certain expenses, such as retirement plan contributions. For most deductions, as an employer, you’ll need to get permission from your employees before withholding any money from their paycheck. This required permission does not include legally required deductions, such as federal income taxes, Medicare contributions, or Social Security contributions. 

Source: SmartSheets

Finally, here is a template for your employees to keep their hours. As you need to add this information to your payroll, you must make sure it’s accurate. Keeping time records helps with this accuracy, preventing more significant issues from emerging down the road.

Source: SmartSheets

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