3 Essential Documents Needed for Online Payroll Processing in the United States

Filip Dimkovski - TBR writer
By Filip Dimkovski
Michelle Meyer - Editor for TBR
Edited by Michelle Meyer

Published October 5, 2022.

Man sitting at a desk in front of a laptop, marking off items on a checklist

As a business owner, you probably love the feeling of seeing your company grow while you practice your craft. However, as you've likely already noticed, the growth of the business means bigger responsibilities and more administrative tasks. While getting new employees and watching your team grow is an amazing feeling, it can also be quite overwhelming. Trying to keep track of employee hours, vacation days, sick days, and payroll can quickly turn into a full-time job.

Managing payroll is one of the most important aspects of running your own business. If your employees aren't properly compensated, they'll immediately start job hunting and looking elsewhere. When processing payroll, it's absolutely necessary to have the right documents prepared. Every time a new employee joins the team, you'll have to go over the legal and administrative process of handling documents.

» New to online payroll? Follow these tips to set up online payroll

1. New Employee Documents

The first set of documents you need when setting up payroll for a new employee is their basic information. This will include items such as their full name, address, date of birth, Social Security number, and similar relevant data. All of this information is necessary in order to correctly fill out the necessary tax forms.

In addition to the employee's basic information, you'll also have to get some forms ready. This includes W-4 forms, state withholding allowance, 1-9 forms, and more. Without these forms, it will be nearly impossible to properly calculate and manage the taxes you need to pay for each employee.

Although it's sometimes overlooked, we recommend looking into documents for employee benefits too. This includes health insurance and retirement plans like your employee's 401k.

» Want to ensure employees are managed correctly? Discover the difference between employee compensation and benefits

2. Business Documents

In addition to the employee documents, you'll also need to have some paperwork filled out for your business. After all, payroll isn't just about calculating an employee's salary—it's also about making sure your business is compliant with the law.

To start, you'll need an Employer Identification Number (EIN). As a business owner, you can apply for this number through the IRS website. Once you have your EIN, you'll be able to process payroll and file taxes through your business bank account.

Next on the list are state and federal tax forms. These will depend on the location of your business and the type of business you have. For example, if you have a sole proprietorship, you'll need to file a 1040 schedule C. On the other hand, if you have an LLC, you'll need to file a 1120S.

3. End of Year Documents

Finally, you'll need to have some documents ready for tax season. The truth is that payroll taxes aren't just deducted from each paycheck, as you'll also have to pay your share as an employer.

Necessary documents include W-2 forms for each employee, 1099 forms for contractors, and your business tax return.

If you don't have these documents ready, you might end up owing the IRS a lot of money come tax time. Not to mention, you might also get hit with some hefty penalties.

» Want to stay tax compliant? Understand the difference between payroll tax vs income tax


As you can see, there are a lot of essential documents you'll need in order to process payroll for your business. From employee information to tax forms, it's important to have everything ready before you get started. Moreover, these documents differ from state to state, so it's crucial to get the right information before you submit the documents.

Along with other payroll processing tips, it's also recommended to outsource at least some of the tasks to specialists. In the majority of cases, outsourcing is quite a viable option, as it will get a big portion of the hard work done for you. Trying to bear the responsibility of manually handling all documents is difficult, and one mistake could cost you a lot.

» Thinking of outsourcing HR functions? Investigate different types of PEOs

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