- Payroll reports can help you fill out government forms and prepare for an IRS audit, workers' compensation claim, or state agency inquiry.
- Payroll reporting helps you monitor the health of your business, engage employees, and maintain cash flow.
- Payroll software can automate manual tasks such as calculating workers' compensation premiums, classifying employees, and onboarding new hires.
- This article is for employers who want to know how to manage payroll reporting via top payroll software.
Payroll reports are valuable for employers and employees alike, as you can use them to calculate an employee's wages, taxes, deductions and benefits. Payroll reports can also be vital for business audits, tax preparation of government forms, and workers' compensation claims.
What is a payroll report?
A payroll report includes detailed information about an employee, department or team. An employer can use the report to verify tax liabilities and company accounting data. A payroll report may include pay rates, timesheets, overtime data, taxes paid by the employee and employer, PTO, and more.
Importance of payroll reporting
There are many reasons tracking your payroll data is important. These are the major ones:
1. Monitoring employee turnover rate
Employee payroll data can help you monitor employee turnover. For example, high turnover in a particular department could indicate a lack of employee engagement there. Conversely, low turnover might indicate a lack of skill-building or ambition among your workforce. Identifying these trends can help you plan proactive solutions.
Did you know? The average U.S. business spends around $4,000 to hire a new employee and, in some cases, over 50 days to fill the position.
2. Appreciating your employees
If your payroll software doesn't track important milestones, the lack of recognition could become a drain on team morale. Choose software that automatically reminds you of birthdays, bonuses and pay increases. This proactive recognition on your part helps keep your employees engaged and feeling like valued members of the team.
3. Customizing reports
Your business isn't the same as its competitors, so why run standard payroll reports only? The best payroll software can help you create custom reports to stay on top of your business processes and employee issues and to provide the best benefits.
4. Maintaining cash flow
When you keep up with payroll, you not only keep your business in check but ensure that you are not underpaying or overpaying any of your employees. Payroll software can accurately track hours worked, overtime, custom PTO policies, sick days, employee taxes and tax deductions.
Did you know? Payroll fraud is a real threat to U.S. businesses. There were over 1,000 complaints between January 2018 and June 2019, with a total reported loss of over $8 million.
Both terminating and onboarding an employee can be costly. Use payroll software to maintain cash flow and help you minimize worker transitions.
5. Accurately managing taxes
As a business owner, you are responsible not only for paying your own taxes but also for withholding employee payroll taxes and providing your employees with accurate tax information. Automating your payroll can help you keep all tax documents in one place for quick reference or changes. Moreover, in the event of an audit or a tax deadline, you will have all of your documents organized to minimize the time it takes to settle up with the IRS.
Types of payroll reports
There are several types of payroll reports. While customization and payroll providers can affect the names of payroll reports, here are the top 10:
1. Employee summaries
An employee summary is a concise report containing the employee's personal data such as name, address, hire date, pay type (i.e., salary or hourly) and tax information.
2. Error report (unpaid employees or missing deductions)
You can run an error report to see if any current employees did not receive a paycheck or a regular deduction was not processed. Payroll software may indicate the error with an asterisk or a separate report.
3. Liability report
You can run a liability report to see employee wages and tax responsibilities for a particular pay period. However, it does not usually account for payroll service charges.
4. Paid time off (PTO) report
In most cases, an employee has a finite number of PTO hours (or days) they can take per year. Tracking PTO through payroll software can help you determine how much time off an employee has left and if multiple employees have requested vacation time on the same dates.
5. Payroll detail/preview
A payroll detail or preview provides a line-by-line view of an individual employee's, department's, or team's compensation history. This report can also help you search for a particular transaction or paystub discrepancy.
6. Payroll service charges
You can easily access payroll software charges under a dedicated tab on your payroll system's dashboard. You can typically view these by line item, or sort and filter them for various views.
7. Payroll summary
Payroll summary reports include information about an individual employee, department or team. For example, you or your payroll administrator can enter a date range to see gross and net wages, tax withholdings, and other deductions.
8. Payroll tax liability
You can run a payroll tax liability report to see if you are withholding the appropriate amount from employee wages, how much you have paid to the IRS, and how much you owe.
9. Retirement contributions
Employees can voluntarily contribute to a 401(k) or 403(b) retirement plan, and you can match their contributions. A retirement contribution report will document and segment such contributions.
10. Workers' compensation report
What types of payroll reports do employers need to file?
Businesses are required to file federal, state, and local government forms quarterly and annually. Payroll reports can give you up-to-date information for submitting government forms and preparing for an IRS audit, workers' compensation claim, or state agency inquiry.
Form 940, Employer's Annual Federal Unemployment Tax Return (FUTA)
Form 940 helps you declare and pay FUTA taxes, in accordance with the Federal Unemployment Tax Act. FUTA tax can go up to 6% on the first $7,000 in employee earnings, but you may pay less if you participate in state unemployment taxes. Payments for FUTA are due Jan. 31 of the following year.
Form 941, Employer's Quarterly Federal Tax Return
Businesses file federal payroll taxes using Form 941, which includes the following information:
- Employee wages
- Federal income tax withholdings from employee wages
- Medicare and Social Security taxes (paid by employees)
- Medicare and Social Security taxes (paid by employer)
Form 944, Employer's Annual Federal Tax Return
Small businesses can request to file taxes annually (instead of quarterly) through the IRS.
Tip: A general requirement for using Form 944 is an annual Medicare and Social Security federal income tax withholding of $1,000 or less.
Form W-2, Wage and Tax Statement
Employees use a W-2 form to file their income taxes. The form lists an employee's annual gross wages, deductions and benefits. As the employer, you must complete this form and distribute it to your employees by Jan. 31 of the following year. You must also file a copy with federal, state and local governments.
Form W-3, Transmittal of Wage and Tax Statements
Form W-3 is a summary of all your business's wage and tax statements. A W-3 is sent to the Social Security Administration and due by Jan. 31 of the following tax year.
Local payroll reports
States have their own rules for income tax that is charged at the city and county level. Due dates vary from quarterly to annually. It is best to check with your local government for current tax laws and deadlines.
State payroll reports
Each state has its own rules regarding income and unemployment taxes. Most states prefer businesses to pay income and unemployment taxes quarterly. There are different forms and deadlines for different states.
How to keep up with and manage payroll reports
The best way to keep up with your payroll report management is to have payroll software streamline the process. Payroll software platforms like those featured in our ADP review and Gusto review can help you manage the payroll aspects of your business with ease.
When you think of buying payroll software, you may be overwhelmed with the choices and the cost. However, putting off the automation of your payroll will cost you more in frustration, time and money over the long run. Your business will be able to accomplish these tasks easily when you choose a top payroll software provider:
- Integrate attendance and payroll in one system.
- Properly classify employees.
- Automate time clocks for hourly employees (let the software calculate overtime pay).
- Electronically fill out and submit forms.
- Submit accurate paychecks on time.
- Prepare for a possible IRS audit.
- Calculate taxes and deductions accurately.
- Automatically calculate PTO.
- Streamline management approval of employees' hours.
- Ensure compliance with labor laws.
- Update your onboarding and training processes.
- Eliminate human error and missed deadlines.
- Monitor your cash flow.
If buying payroll software isn't an option for your business right now, you can still take these steps to manage your payroll proactively:
- Set reminders and mark your calendar so you never miss a payday or tax deadline.
- Prepare spreadsheets and forms well before the due dates in case you run into any issues.
- Seek professional help from a CPA or accountant when you have questions about compliance with labor laws or regulations.