PayrollWhat Is Year-to-date Payroll and Why Does it Matter?

When you run a small business with several employees, a sizable chunk of expenses in your business will go to paying your workers’ wages. For an employer, it is a must to keep track of your year-to-date payroll.

Year-to-Date Payroll: A Short Definition

Year-to-date payroll or YTD refers to the amount of money being spent on employee payroll from the start of fiscal or calendar year to the present payroll date. This is being calculated according to the gross incomes of your employees. Gross income, meanwhile, is the amount an employee can earn before deductions and taxes are taken out.

Year-to-date payroll can also pertain to the money you pay to independent contractors. These independent contractors are not necessarily your employees. Instead, these are self-employed workers you hire to perform a specific job.

In the case of employees, year-to-date payroll is basically their gross income. As for a business, year-to-date is a representation of the total earnings made by all employees. This will include payments made within the year but not earned within this year. For instance, you can add a commission sale made later the previous year but was not paid until the present year.

 

What Makes Year-to-Date Payroll Important?

Year-to-date payroll gives you the chance to compare the payroll expenses of your employees to the yearly budget for these costs. You will also be able to check the amount which goes to the payroll in relation to your overall expenses.

Another importance of year-to-date payroll is related to filing out the employee Form W-2s. When you are running your payroll by hand, you have to know the exact payment for every employee to ensure an accurate Form W-2.

Having a good understanding of your year-to-date payroll allows you to check whether you are staying on track to meet all of your projected results for the current year. The year-to-date payroll can also serve as your basis when making crucial decisions such as budget cuts and hiring.

It is also through year-to-date payroll that you can predict or determine your tax liability. Being a business owner, you have to be aware of your yearly and quarterly tax liabilities. When you have a high tax liability, you can postpone some big purchases.

Every time you change your payroll software, it is important to enter in your year-to-date payroll to have a proper calculation of your taxable wage bases.

 

Pay Stubs and Year-to-date Payroll

Your workers can see and check their year-to-date payroll earnings through their pay stubs. You have to ensure that you give a pay stub every time you pay your employees.

The pay stub will show your employees the wages they earned during a pay period and year-to-date. This will list their gross wages, deductions and taxes, as well as net wages.

All of these details can be very helpful for your employees to predict if they are going to owe any money to the IRS prior to the filing. When their year-to-date earnings show what they owe, employees can choose to claim lesser withholding allowances on Form W-4. On the other hand, they can also claim more when they predict they are going to receive a fund.

 

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