Small businesses are expected to offer direct deposit now. It helps your employees skip running to the bank, and they can easily access online paystubs. It also accommodates fully remote employees and helps you cut down on paper, ink, and delivery fees.
However, it can still feel overwhelming to some small employers to know how much money to have in the correct account by a certain time. If your payroll service doesn’t disclose this information clearly, you can end up with additional fees or, worse yet, unpaid and unhappy employees.
At CSI Accounting & Payroll, we’ve worked with thousands of small business owners over the past several decades. Often, these owners want to know:
- When do I need to report my payroll information?
- When are my direct deposit funds processed and collected?
- When are my payroll taxes collected?
- How much is payroll tax?
When Do I Need to Report my Payroll Information?
The first step is to report the hours worked to your payroll specialist. If you work with CSI Accounting & Payroll, you should have your reporting done four business days before the pay date. Larger, national payroll services tend to follow the same four-business-day rule for reporting.
Most businesses pay their employees on Fridays. If we’re assuming a Friday pay date (when direct deposit hits), then you'd need to have your reporting done on Monday.
When Does my Payroll Specialist Process and Collect my Direct Deposit Funds?
CSI processes your payroll four business days before the pay date (which is why we need your information reported by then), and then we collect the direct deposit funds three business days before the pay date. Still using that Friday pay date example, we'd process on Monday and collect the funds on Tuesday.
If you don’t have enough funds in your account, we notify you one business day before the pay date. Depending on your situation, there may be an option to re-debit if the funds are available. In certain situations, you may be required to do a wire transfer.
Some banks say that they can get your employees their money two days earlier. This is called “early direct deposit.” If your payroll specialist can accommodate this, your direct deposit funds are released early. Be sure to keep this in mind if you’re considering this option!
National payroll services collect funds differently. Normally, your direct deposit funds, invoice amount, and taxes are taken out all at once and impounded. The payroll company puts your money into its own bank account, gets a float on the interest, then pays it out to where it's supposed to go last minute. Your money benefits them. However, you may be able to opt out of tax impounding.
When Does my Payroll Specialist Collect my Payroll Taxes?
Generally, CSI pulls payroll taxes on your pay date, and we find out if the money was available in the account two business days later. We send the payroll taxes to the taxing authorities’ accounts the following business day.
How Much is Payroll Tax?
While it’s hard to pin down an exact amount that you’ll have to set aside for your payroll taxes, a quality payroll service like CSI will provide access to a payroll report that won’t leave you guessing. Our reports detail your cash requirements for:
- Direct deposit
- Payroll taxes
- Your payroll service’s invoice amount
These amounts are shown in your portal when you are reporting and previewing your payroll. This ensures you’ll know how much money to have in your account ahead of time to cover each of the amounts. Learn more about payroll taxes here.
Work With a Local Payroll Service
With direct deposit becoming a mainstream form of payment, you should now have an idea of when you can expect your direct deposit and payroll tax funds to be collected, as well as how you can tell what payroll taxes you’ll owe and when you should report your payroll.
If you’re interested in seeing how a local payroll service can get your payroll done simply and transparently, we hope you’ll consider giving CSI Accounting & Payroll a try! Click the button below for a free consultation.
Not ready to talk yet? That’s okay! You can try our pricing calculator to see what our payroll service may cost you first. Click the image below:
