Two of the biggest complexities of running your own practice are hiring employees and reporting payroll.

Betty Black for MD News writes: Human resource and payroll management is a daunting task. The best recommendation is to use a reputable payroll service, such as ADP or Paychex. But if you are determined to do it on your own, you need to know some basic points before you get started. When setting up an office and hiring employees, you enter a whole new area of responsibility.

When you hire a new employee, he or she must fill out the Form W-4, Employee’s Withholding Allowance Certificate. You must verify that each new employee is legally eligible to work in the United States. This includes completing the Form I-9, Employment Eligibility Verification. You can get the form from USCIS offices or at uscis.gov.

You or your accountant has probably filled out Form SS-4 to receive an employer identification number (EIN). Your next step would be to fill out the Texas Workforce Commission (TWC) Form Status Report (C-1) to apply for a Texas unemployment account number. This process is available to complete online atservices.twc.state.tx.us. This website has a vast amount of employment information for new employers. You can review Texas labor laws, minimum wage and overtime information. Texas employers must report all new hires within 20 calendar days of the hire. This can also be done online.

TWC has streamlined their services, and you can file and pay your unemployment taxes on its website. These returns are due by the last day of the month following each calendar quarter. The purpose of this report is to inform the TWC how much an employee was paid and to calculate how much state unemployment tax the employer must contribute based on their employees’ wages. Your tax rate depends on the amount of unemployment claims for the past year, but your beginning rate will be 2.7 percent of the first $9,000 paid to each employee.

Each payday, you will withhold federal income tax based on each employee’s Form W-4. You will also withhold the employee’s share of Social Security and Medicare taxes from his or her paycheck. These amounts, along with the employer’s portion of Social Security and Medicare taxes, need to be deposited periodically. The due date of the deposit depends on your deposit schedule — typically monthly or semiweekly. Generally, all new employers are monthly depositors. For monthly depositors, you must pay the taxes withheld by the 15th of the following month of issuing paychecks. All tax deposits must be made via the Electronic Federal Tax Payment System (EFTPS). EFTPS is a free service provided by the Department of the Treasury. To get more information or to enroll, visit eftps.gov.

Each quarter, all employers who pay wages must file Form 941, Employer’s Quarterly Federal Tax Return. This report is due the last day of the month that follows the end of the quarter. This report is used to report Social Security, Medicare and withheld federal income taxes deducted from your employees’ paychecks.

Another tax paid by the employer, based on its employees’ wages, is paid with the filing of Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. This return is due annually Jan. 31. The FUTA tax rate is 0.6 percent based on the first $7,000 paid to each employee.

Also due at year-end is Form W-2, Wage and Tax Statement. Every employer who pays wages for the year for services performed by an employee must file a Form W-2 for each employee. You must furnish each employee his or her copy of the completed Form W-2 by the last day of January of the following year. The W-2 not only informs employees how much their salary and taxes deducted for the year were but also lists certain benefits received and amounts deducted. You must also file a Form W-3 to transmit Copy A of Forms W-2 to the Social Security Administration. The W-3 and Copy A of Form W-2 are due to the Social Security Administration by the last day February.

As you can see, payroll calculation and reporting involves more than one report and more than one governing agency. Payroll compliance is a very important aspect of your business and, if not completed correctly, can result in various penalties and interest. That is why it is very important to know and understand all aspects of the payroll process.

The author Betty Black is an Enrolled Agent @ SS & Assoc.