Attorney Payroll

If you work with attorneys and law firms, you know that their payroll is complex. Many times the most basic payroll service options won’t do. Additionally, add to that the compensation reporting that can get quite interesting. And will get into more of that next week.

In our prior meeting in our private group, The Accountant’s Law Lab, we talked about all things payroll. It was a lively conversation around:

How to do it manually
Why do it manually?
What product is the best?

The consensus of the group was to choose Gusto. I have always recommended QuickBooks Online Payroll. It has a new lineup, and I wrote all about that in this link, and then I did a webinar on this link with my good friend, Sandy Edwards, from Intuit.

When speaking in terms of desktop or manual payroll, and even if you use a service, it’s good to know how payroll works. I highly recommend having a full-service payroll system, but on the flip side of that, it’s good to know what taxes are paid, and the dates paid, and what other benefits and such attorneys tend to use.

In our group, I shared an old excel doc that was helpful to the members to show them how the payroll liabilities and expenses lay out and how it all totals beautifully.

When I first started doing accounting, I also remember how I was scared to death to touch payroll because I was afraid I would do it wrong. It was all manually processed back then, and we even had to do the tax returns manually. In a sense, doing the work by hand was what helped me understand the big picture. It is essential to learn all the payroll tax forms.

Forms you should know

A good resource irs.gov. That site won’t fail you and wanting to learn about what forms go where. There’s a ton of information there.

Contractor W9

If your client hires a contractor, you need to send a W9 form so you can get the SSN or FEIN from them. You will need that at the time of processing 1099 NEC forms at year-end.

Link to W9 form from IRS that is a fillable form

Employee W4

When onboarding an employee, you need them to fill out a W-4. While this used to be a simple process, it’s become a little bit more complex as the form has changed. Here’s another resource for you and helping your client’s employees fill out this important form. When you complete the W-4, it informs your employer of how much money to withhold from your paycheck for federal income taxes.

You may get asked by the employees, "what should I deduct?" Here is an estimator to help your client's employees determine their best withholding. You don't want to withhold too much because then you are letting the government use your money interest free for the year. You don't want to under-withhold either. Then you would owe a large amount at tax time.

Employee/Employer 401k Plan

If you work with an attorney-client, you might have to go and pay their 401(k). That’s where the calculations can get a bit tricky. Sometimes, you have to log onto another site if they don’t have Guideline and do the calculations in the salary and match. While the payroll program will do the calculations for you, you still have to book them into an outside page. Here is another good resource on all things 401k from the employers perspective and the employee's.

941

The 941 is a tax return that is submitted quarterly. Employers use Form 941 to:

Report income taxes, Social Security tax, or Medicare tax withheld from employee's paychecks.
Pay the employer's portion of Social Security or Medicare tax.

For the 941, the person gets paid a gross wage. The employee has taxes withheld for federal tax, medicare and social security. The employer has to match Social Security and Medicare tax.

Suppose your attorney-client asks you how much would the total expense be if he/she hires someone at $20 per hour with a 40 hour week, for example. You can calculate it by using this link, a great resource from ADP to calculate the entire salary and the matching taxes. Add any other benefits in there that you will be offering to the client employee.

In Conclusion...

These are just a few of the items that we discussed in our meeting. If you find doing payroll scary, I think you’re not alone. It’s one of those places that you don’t mess up because it can affect your client with fees or penalties. Remember penalties paid or not deductible.

I hope this helps you understand a little more about payroll and just a few of the forms we need to pay attention. It’s also a new hire form that you have to fill out in your state to let the state know that this person has been hired. If you have full-service payroll, you don’t have to fill it out. If you’re doing manual, you do.

For the 941, the person gets paid a gross wage. The employer has to match Social Security and Medicare tax. Suppose your attorney-client asks you how much would the total expense be if he/she hires someone at $20 per hour with a 40 hour week, for example. You can calculate it by using the link above and calculate the entire salary and the matching taxes. Add any other benefits in there that you will be offering to the client employee.

Looking to the past has some merit but there are so many ways you can work towards setting goals and forecasting for your client’s books.