As a small business owner, you know that the payroll process requires keeping track of a lot of information.
From tracking retirement contributions to payroll withholdings, there’s plenty of data associated with every paycheck and employee. Fortunately, you can leverage payroll reports to gain a bird’s-eye view of your payroll process.
So what exactly is a payroll report, and what are the different types you can use for your small business?
Follow this guide to learn more about payroll reports and how to use them to meet payroll reporting requirements and gain actionable insights for your business.
Benefits of payroll reports
While filing taxes requires some payroll reports, you can also use them internally to help make your life a little bit easier. By maintaining accurate payroll reports, your business can reap the following benefits:
- Streamlined tax reporting: When it comes time to file your small business taxes, having the proper payroll reports can help make the tax filing process run more smoothly.
- Valuable budgeting information: Payroll reports provide important data that can help you predict your payroll expenses and allow you to make informed decisions.
- Accurate paid time off (PTO) tracking: You can use payroll reports to help keep track of your employees use of PTO, allowing you to make sure people are using their time off appropriately.
- Actionable employee data: Lastly, payroll reports provide you with actionable employee data that allows you to see a variety of insights, from total retirement contributions to total tax withholdings for each employee.
Now that you understand the benefits of payroll reporting, let’s look at the different types of payroll reports your business can utilize.
Types of payroll reports
Throughout the payroll process, you may generate different types of payroll reports for various reasons, such as tracking your employees’ use of paid time off and their total hours worked. Read along to learn more about common types of payroll reports and their uses.
Payroll summary reports
A payroll summary report provides a great overview of your payroll activity, including the total gross pay, adjusted gross pay, net pay, and all employer taxes and contributions. These reports are used internally and can provide a big-picture view of your business’s overall payroll expenses for the pay period. This information can help business owners with budgeting out employee costs.
Employee payroll reports
In an employee payroll report, a payroll administrator may see information such as wages and payroll deductions for a specific employee. These reports are for internal use and can be useful in determining an employee’s total wages or tax withholdings.
Retirement contributions reports
If your business offers a 401(k) or another retirement plan, you can run a retirement contributions report to see an overview of retirement contributions made by yourself and your employees.
Paid time off reports
Have you ever wondered how many PTO days each of your employees has taken? With a PTO report, you can combine time tracking and payroll information to determine exactly that. This information can help you see how often your employees use PTO, and make informed scheduling decisions.
Workers’ compensation reports
If your business offers workers’ compensation, a workers’ compensation report may be useful in helping determine your insurance premiums, as the cost of payroll influences these rates.
Payroll tax liability reports
A payroll tax liability report can help employers see the taxes they’ve withheld from employee wages, how much they’ve paid, and the taxes they still owe. This provides employers with a general overview of their payroll liabilities.
What types of payroll reports do employers need to file?
Employers generate payroll reports for federal taxes, state taxes, unemployment compensation, and Medicare and Social Security. As you’ll see below, employers submit some tax forms quarterly and others annually. Keep in mind that the date to submit tax withholdings and the date to file reports may differ.
Form 941
Form 941 reports federal income tax withholdings and Federal Insurance Contributions Act (FICA) taxes. These are collected to fund Social Security and Medicare taxes. Form 941 reports FICA taxes withheld from worker pay and the employer’s share of FICA taxes. Businesses submit the form with quarterly tax payments.
For the 2023 tax year, employers and workers each pay a 7.65% FICA tax rate on a worker’s gross wages. Taxes are withheld from gross pay and are sent to the federal government by the employer.
Medicare assesses a tax on every dollar of earnings. Social Security taxes, however, have a wage base limit. For tax year 2023, workers pay Social Security tax on the first $160,200 in earnings. Recent tax law changes have added an additional 0.9% Medicare tax on wages above $200,000.
Form 940
Employers submit Form 940 to report Federal Unemployment Tax Act (FUTA) tax annually. FUTA and State Unemployment Tax Act (SUTA) provide temporary income for workers who lose employment, generally when the employee is not at fault.
In 2023, the FUTA tax rate is 6% and applies to the first $7,000 paid to employees during the year. If you also pay SUTA tax, you may be eligible for a tax credit of up to 5.4%. Keep in mind that SUTA tax rates can vary from state to state.
Form 1096
Form 1096, Annual Summary and Transmittal of US Information Returns, reports the dollars paid using Form 1099 and the gross earnings paid. Businesses issue Form 1099-NEC (or simply Form 1099) to report non-employee compensation to freelancers and independent contractors. Form 1099 doesn’t include withholdings for FICA tax or income taxes.
Companies have to send a Form 1099 to workers paid $600 or more during the year. Freelancers and independent contractors must pay income taxes and FICA taxes on all earnings, even if a 1099-NEC isn’t issued.
Form 944
If your business liability for federal income taxes and FICA taxes is $1,000 or less in a particular year, you can file Form 944 and pay taxes annually.
Forms W-2 and W-3
Employees file Form W-2 annually with their personal tax return to report gross wages and federal tax withholdings.
Form W-3, Transmittal of Wage and Tax Statements, reports an employer’s total wages and tax withholdings. When you submit Form W-3, include a copy of each W-2 you issued for the tax year.
State payroll reports
Companies must also withhold and submit state income taxes using state tax forms. The requirements depend on the state, and some states do not assess state income taxes.
Local payroll reports
Similar to state payroll reports, businesses may also be subject to income tax at the local level, whether city or state. These reports may be due annually or quarterly, so check with your local authorities.
Payroll report example
A payroll summary report provides a great overview of your payroll activity. It includes the following details:
- Gross pay: The amount an employee receives before subtracting any taxes or deductions.
- Adjusted gross pay: Gross pay minus pretax deductions, such as an employee contribution to a 401(k) plan.
- Net pay: The amount of money an employee receives after taxes and deductions. This is the payment received from a payroll check or submitted through direct deposit.
- Employer taxes and contributions: This section lists payroll expenses incurred by the employer for FICA taxes, unemployment taxes, and other tax liabilities.
To help you better understand what a payroll report looks like, look at the sample payroll report above.
This article originally appeared on QuickBooks and was syndicated by MediaFeed.org.
4 types of personal loans for people with bad credit: Are any of them right for you?
Subprime personal loans can help you obtain financial help if you’re being denied access to traditional loan products. However, because they’re usually tailored to low credit borrowers, the drawback is that they often come with high interest rates and fees. Nevertheless, they can provide a financial solution where there once was none.
Read on to discover the answer to the question: What is a subprime loan? Learn the subprime loans definition, how these loans work, and the steps to take to get a subprime personal loan.
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Subprime loans are for borrowers who have any of the following characteristics:
- Poor credit
- Low income
- Zero or limited credit history
- Less than ideal collateral
What is a subprime loan? Essentially, the subprime loans definition is a loan option for borrowers who have trouble getting loans through a traditional route. Many different types of loans offer subprime options — such as subprime personal loans and subprime auto loans.
While subprime loans are more expensive than other loans, they do serve a few purposes:
- They provide borrowers access to needed funds.
- They help borrowers who have no credit or poor credit the opportunity to build a stronger credit history with financial institutions.
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What constitutes a bad credit score? It depends on the credit score calculation used. FICO® Scores calculate a subprime credit score as anything between 580 and 669. Meanwhile, VantageScore® considers subprime to be any score between 300 and 600.
Can Subprime Loans Impact Your Credit Score?
Applying for and getting a subprime loan doesn’t hurt your credit score any more than the average loan. As far as your credit score is concerned, there is nothing different about a subprime loan versus a prime-rate loan. Your score is affected the same way either way.
Any time a lender runs a hard credit check during a loan application, your credit score is hurt a few points. But making loan payments on time can help you build credit.
The largest contributor to a person’s FICO credit score is their payment history. It accounts for 35% of a person’s total score, and is why making your payments on time is so important.
Paying down your loan will gradually lower your amount owed (which accounts for 30% of your FICO credit score).
Over time, a subprime borrower may be more likely to qualify for a prime-rate loan, as long as they have paid their bills on time and paid down their debt. (Learn more at Personal Loan Calculator)
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What is subprime lending? Many lenders offer subprime loans — they’re not unusual. You can get a subprime mortgage, subprime auto loan, or subprime unsecured personal loans. Shopping for subprime loans is simple. Use a loan broker platform and enter your credit score, ZIP code, and how much you want to borrow. From there, you’ll receive a list of lenders who are willing to work with borrowers who have a similar credit portfolio.
Once you formally apply, you’ll be given more specific loan terms. From there, compare personal loan rates and repayment periods. You may even want to make a subprime personal loans list of all your favorites. Depending on which type of loan you need, you may be required to put down a large down payment. For example, if you need a subprime auto loan, subprime borrowers typically need to put down a larger percentage of the purchase price than borrowers with good credit.
Once you’ve been approved for the loan, the repayment process is the same as any other loan product, but you will be paying more than someone who borrowed the same amount but has better credit. With subprime loans, origination fees, and interest are usually higher than a standard loan.
You may also have a longer repayment period, which has its own set of benefits and drawbacks. Generally speaking, a longer repayment period lowers your monthly payment, but it also increases the overall cost of the loan because interest accrues over a longer period of time. Keep in mind that subprime can mean different things to different lenders. Your credit score isn’t the only thing that may cause a lender to think of you as a subprime borrower. Other contributing factors include your income and collateral.
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There are a few different types of subprime consumer loans, each having its advantages and disadvantages:
1. Interest-Only Subprime Loans
At the beginning of an interest-only subprime loan, your payments are only going toward interest. Therefore, while your monthly payments are small, you’re not actually paying down the loan because you’re essentially just paying lender fees. When you’ve finished paying off the interest, all payments go toward the loan’s principal. Unfortunately, the monthly payment amount increases once this shift occurs.
With a fixed-rate subprime loan, the interest is the same throughout the life of the loan, which means your monthly payments are always the same. The downside to this is that the repayment period can be as long as thirty or more years. While this lowers the monthly payment amount, it increases the amount you’ll pay in interest over the life of the loan.
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For the initial duration of an adjustable-rate subprime loan, interest rates remain fixed. However, rates become variable after the initial fixed-rate period. Consequently, your monthly payments can change as the market fluctuates, which means you don’t know in the beginning how much you’ll actually pay for the loan. The frequency of payment amount changes depends on the type of loan you choose. Adjustable-rate loans can change every month, quarter, year, three years, or even five years, depending on how the loan is structured.
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Dignity subprime loans require borrowers to put down 10% of the loan amount in order to qualify. The borrower must agree to higher interest rates during the initial repayment period, after which the interest rate lowers to a prime rate if the borrower has made regular, timely payments.
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Knowing the positives and negatives about subprime loans will help you make a smart financial decision.
For instance, as mentioned, the interest rates on subprime unsecured personal loans are high. Borrowers with bad credit will likely get a rate near the high end of a lender’s range, which could be 35.99% or higher. That means if you took out a loan for $10,000 with a rate of 35.99% and a repayment term of seven years, you’d pay $17,489.90 in interest. However, if you qualified for an interest rate of 9.95% for that same loan, you’d pay $3,923.30 in interest. As you can see, the difference is substantial.
With some financial care, someone who qualifies only for a subprime loan may be able to improve their financial situation, enhance their credit history, boost their credit score, and qualify for a prime-rate loan in the future.
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Personal loan approval is never guaranteed, but here are some lenders that may offer online personal loans to borrowers with subprime credit. (The following information on APR range, loan amounts, and maximum term lengths will be updated weekly, every Monday.) (Learn more at Guide to Prime Loans)
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Step 1: Start by checking your credit score. Many banks offer their account holders free updates on their credit score.
Step 2: Determine how much you need. Many subprime lenders have specific ranges of loan amounts. Knowing what you need will determine which lenders may be willing to work with you.
Step 3: Calculate your annual income. Lenders typically want to know your pre-tax (or gross) income. Use tax returns and pay stubs to calculate how much you make.
Step 4: Gather the appropriate documentation and information. You may be asked for the following:
- Government-issued ID.
- Tax returns.
- Pay stubs.
- Social Security number.
- Employer name.
- Start date of current job.
- Amount of recurring debts.
Step 5: Apply online. A loan broker can speed up the application and rate comparison process by only requiring one application.
Step 6: Compare rates and loan terms. When comparing loan products, look at the following information provided by each lender:
- Repayment period.
- Type of interest (fixed or variable).
- Interest amount.
- Penalties.
- Origination fee.
- Secured or unsecured.
- Monthly payment amount.
Step 7: Choose the lender offering the best loan product for your specific financial needs. By comparing the above loan terms, choose a personal loan that fits within your budget the best. Don’t just look at interest, but also pay close attention to fees, such as the loan origination fee. For example, one company may offer a slightly lower APR, but when you take into account the loan origination fee, it actually becomes more expensive than other options.
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Subprime personal loans and regular personal loans share some of the same characteristics. But they also have some key differences that it’s important to be aware of:
Similarities
Both subprime personal loans and regular personal loans allow you to borrow money that you repay with interest in installments over a set period of time. Both types of loans can affect your credit. As long as you repay these loans on time consistently, they may help build your credit.
Differences
Subprime loans have higher interest rates than regular loans. They also come with higher fees, such as origination fees, and borrowers might be limited to smaller loan amounts. The repayment period for subprime loans is often longer, which can make your monthly payments smaller, but you’ll pay more in interest over the life of the loan.This chart gives you an at-a-glance comparison of the pros and cons of subprime loans vs. regular loans.
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Knowing when to consider subprime personal loans is sometimes half the battle. When it doesn’t feel right, consider the following alternatives:
Getting a Cosigner
Cosigning on a personal loan can dramatically improve your chances of getting a prime-rate loan if your cosigner has a strong income and credit score. The downside, however, is that if you miss payments, both of your credit scores will be hurt because both of your names are on the loan.
Borrowing From Friends and Family
Sometimes, a loan from a formal financial institution is not the answer. Asking a friend or family member for a loan may be a solid alternative. By signing a promissory note or loan agreement, you can put your lender at ease, knowing you’re serious about paying them back.
Selling Assets
Sometimes we overextend ourselves and purchase things that are difficult to afford long term, such as an expensive car. If you have a financial emergency that requires immediate funding, consider selling some of your assets and using the proceeds to fund whatever it is you were considering a loan for.
Pay by Cash
If you have the money in savings, but are considering a subprime loan to improve your credit, it may make more sense to pay by cash and take your time improving your credit score by other means. After all, a large portion of your credit score revolves around how much debt you have. If you increase your debt by a significant amount, the benefits of the subprime loan may be marginal.
Home Equity Loan
If you own your home and have accrued enough equity in it, you may be able to qualify for a home equity loan. Unlike subprime unsecured personal loans that require no collateral, with a home equity loan, any equity you have is used as collateral to secure a second loan.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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