Many childcare providers still use spreadsheets to track employee timesheets and run payroll. While spreadsheets are faster and easier than manual calculations, they’re still time-consuming and susceptible to human error. A formula error could lead to paying staff incorrectly, and failure to notice the error early will cause serious problems—you’ll lose money if you overpay or face legal action from disgruntled staff if you underpay.
Payroll reports help you run your business more efficiently, with accurate information for taxes and employee expenses, ensuring that you pay staff correctly and save time and money. In this article, we’ll explore why payroll reporting is important and the different types of payroll reports to create for your business.
What is a payroll report?
A payroll report is a (usually digital) document that contains payroll data, including pay rate, total pay, attendance, hours worked, overtime accrued, employer tax contributions, vacation balances, and federal income taxes withheld. If you’re using payroll software, you can usually generate and download your own payroll reports. However, if you’re outsourcing payroll, you can request the reports from your provider.
The frequency with which you can create a payroll report depends on its use. For example, you can generate the report quarterly for strategic business purposes, like workforce planning and budgeting. At the same time, regulatory filing will require a monthly or more frequent report, depending on your state and local regulations.
Why is payroll reporting important?
Payroll management involves several details, which you can miss if you’re doing payroll manually. Here’s why payroll reporting is important for your business:
Makes tax compliance easy
Payroll reports reduce the stress surrounding tax compliance. You can easily collect, track, and store your staff members’ paperwork, including tax forms like W-2s. Payroll reports ensure that you’re filing taxes on time and withholding and paying the correct taxes, sparing you from costly fines and other penalties.
Helps you make strategic decisions
Payroll reports provide essential information to help you make strategic business decisions. Since the data is accurate, you can make budgeting, forecasting, and workforce planning decisions based on actual data instead of making assumptions.
Tracks various metrics accurately
Payroll reports help with employee time tracking. They also help you accurately track various other payroll metrics, including paid time off (PTO), employee rewards, additional benefits, overtime, continued professional development training, or sick leave. Tracking these metrics gives you insightful information to help you manage staff retention and engagement.
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Types of payroll reports
The types of payroll reports childcare providers must create and file include:
Company payroll reports
Also known as a payroll register or payroll journal, a company payroll report is used internally for forecasting, budgeting, and strategizing purposes and is created at the end of every payroll period. Company payroll reports show your company’s payroll expenses, including withheld taxes and additional company tax liabilities, for a specific period. These reports help business owners calculate Federal Insurance Contributions Act (FICA) taxes every quarter.
Employee payroll reports
Employee payroll reports are also known as employee earnings reports or pay stubs. They show payroll details for an individual employee, including hours worked, hours paid for, taxes withheld, PTO, and reimbursements for the pay period. The Fair Labor Standards Act (FLSA) requires employers to provide employees with copies of their pay stubs every month. The report can be a physical document attached to a paycheck or an online document.
Payroll tax reports
Payroll tax reports show employee compensation information required for various tax filings. Business owners must produce quarterly and annual payroll tax reports and present them to the federal, state, and local governments for payroll tax calculations.
Federal payroll reports
Childcare providers must file federal reports with the Internal Revenue Service (IRS). These reports are typically generated and filed monthly, quarterly, and yearly.
Employers use Form 941 (Employer's Quarterly Federal Tax Return) to report income taxes, Social Security, or Medicare tax withheld from employees' paychecks. This report must be filed every quarter and is due by the last day of the month following the end of each quarter (i.e., April 30, July 31, October 31, January 31).
Instead of Form 941, some businesses file Form 944. It’s an annual tax return for companies that expect to pay $4,000 or less in total employee wages for the year. The IRS will inform you if you’re eligible to file Form 944. This report is due by January 31 every year.
Businesses use Form 940 to report their annual Federal Unemployment Tax Act (FUTA) tax. This tax funds workers who have lost their jobs. It’s paid directly by the business and not the employees’ paychecks and is due by January 31 every year.
Employers must file a W-2 for each employee, which indicates withheld taxes (income, Social Security, and Medicare). These reports are due by January 31 every year.
Businesses use this document to summarize the W-2s and report combined employee income to the Social Security Administration and the IRS. It’s due by January 31 every year.
State and local payroll reports
Most states require businesses to make quarterly payments for their income and unemployment taxes. Common state payroll reports include tax withheld, workers’ compensation, and unemployment tax. States that do not require these reports include Florida, Alaska, Nevada, Texas, South Dakota, Washington, and Wyoming. No matter where your business is located, check your state’s website for details to stay compliant.
Depending on the location of your business, your local government may also require additional forms and payment reports on a quarterly or annual basis. You should consult with your accountant or a tax professional in your area.
Payroll reports examples
Below are three payroll reports examples to give you an idea of what they entail and how you might apply them to your business:
Employer liability report
This report shows all employer responsibility taxes over a certain period. It includes all employer liabilities.
Monthly summary report
This report shows a summary of the hours worked (regular and overtime) by an employee during the month.
Internal payroll report
This internal payroll report shows a business’ payroll costs broken down by department. You can see the payroll amount for each department and what it’s costing the business.
Manage your payroll more efficiently
Payroll management affects your childcare business, from staff engagement and retention to the company’s overall financial health. Payroll reports give business owners and directors peace of mind, knowing that the information is accurate, they’ll save time, and they can use them to make strategic business decisions, all essential elements of running a successful daycare business.
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