A Step-by-Step Guide to Setting Up a Payroll System

Step four: Have each employee fill out and sign IRS Form W-4. The form provides two critical pieces of information: the employee's Social Security Number and the allowances the employee

New workers should fill out a W-4 as soon as possible. Employees who marry or divorce, have children, gain or lose a dependent or want to change withholding amounts for any other reasons should also complete and sign a new W-4.

If you do not have an employee's W-4 on file, you are required by law to treat the employee as a single person with no exemptions for withholding purposes.

Step five: Establish a pay period. Most states require that employers pay workers on regular paydays. A few states allow some employees to be paid once a month, but most require that you pay your employees at least twice a month. Check with your state department of labor for your state's specific guidelines.