When it comes to W-2 tax deductions, the task of completing forms correctly can be a bit tricky until you get the hang of it. By the time you factor in federal tax, state tax, medicare and any other pension or union deductions, the list is quite large.

So in order to familiarize yourself with this software, take a little tutorial of several websites. Think of your little tutorial as "Payroll Software: W-2, Deduction Calculations for Beginners." Here are some tips on just where to look.

1. Familiarize yourself with W-2 calculations via the official IRS website.

2. Take a seminar which specializes in business taxes and W-2 deductions.

3. Browse payroll software companies that specialize in deduction calculations.

Action Steps to Implement Payroll Software
The best contacts and resources to help you get it done

Learn about W-2 calculations and other W-2 form deductions from the IRS

It can be entirely tedious to try and learn about how to correctly take payroll deductions if you're a small business. In that case, it's best to go to the source. That way you know the information will be accurate. Peruse the IRS website for information on W-2 tax deduction information. You can then take that knowledge and apply it to the payroll software program that your business utilizes.

I recommend: Check out the website for the IRS. They offer both an explanation page as well as a "Withholding Calculator" which you can use to calculate W2 and other common withholdings. The IRS also offers instructions on their website. You may use these to educate yourself along with the withholding calculator they provide.

Go to a seminar with information on W-2 deduction calculations

By attending seminars offered by public accountants or other credible associations you'll be able to get a basis of knowledge on W-2 and other tax deductions. Before attending the course, determine what software they will be utilizing so that you can align your computer's software with the one they use during the course of the seminar. That way, as you take the seminar, you'll be training yourself on the software simultaneously.

I recommend: Check out the website for Basics and Beyond Income Tax Seminars. They offer a comprehensive day-long course which covers W-2 tax deductions and other common tax questions for small businesses. Also visit the website for the Michigan Association of Certified Public Accountants. They, along with almost every state's tax revenue board, offers training seminars for businesses.

Learn from the actual payroll software companies about deduction calculations

When it comes to understanding W-2s, and other payroll deductions and how they are implemented into software, it's best to learn right from the software company. Many companies offer everything from tutorials to webinars, customer service help and more. Just be sure that you are utilizing the most up-to-date version as state and federal taxes and other deductions are forever changing.

I recommend: Check out the Intuit website for information on payroll software: W-2 deduction calculations. They offer a free trial of their product, webinars, an online tutorial and a comprehensive breakdown on the W-2 form itself. The Medlin company, which also produces payroll software, offers similar services for their software. Just scroll to the bottom for a sample W-2 application as well as a link to a pdf file.

W-2 deductions preparation is easy when you have software that works with your general accounting program to import the data, and then print it out on the forms you need. Many software programs allow you to print or file these forms electronically, so your employees can get their information easily from the Internet. Some software programs demand certain types of printers, such as laser printers, to print out the W-2 forms and may not work with other types of printers.

Use software to get this job done quickly no matter how many employees you have or how many different types of payroll deductions you have to make. Look at the following when choosing payroll software: W-2, deduction calculations:

1. Choose separate W-2 form deductions software that integrates with your general accounting program.

2. Purchase payroll software that includes W-2 deduction calculation within the program.

3. Obtain special W-2 calculations software for special organizations.

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Create payroll software: W-2, deduction calculations with W-2 forms software

Use software made just to calculate your payroll deductions. Many of these programs will integrate with your general accounting program to import the needed data and make this job an easy one. Check the program before buying to ensure it works with the system you already have in place.

I recommend: Real Business Solutions offers W2 Mate for filing and printing W2 and 1099 forms. Print unlimited forms and get free technical support with this product. EG Systems offers a free calculator to figure deductions for any state. Plug in the figures and the calculator gives you the correct deductions.

Use general accounting programs with a W-2 tax deduction information section

Purchase an accounting program with a section for W-2 included. This saves money over buying two programs and you are sure the programs integrate, so collecting the W-2 data is easy.

I recommend: Account Pro Software offers flexible software, which calculates deductions by fixed or percentage amount or a combination of both. Harris Data offers software with advanced deduction processing features. Calculate earnings with unlimited pay types, tax exempt/tax deferred and garnishments among other choices.

Implement W-2 calculation software for special needs

Some businesses, such as churches, or ones that deal with the government or outsourcing, have special payroll and W-2 needs. Choose software for your special business needs.

I recommend: Church Management Solutions contains special software for church payroll. This software calculates deductions for clergy payroll and reporting. Construction Partner offers special payroll software for dealing with the government or outsourcing your work. This software meets the complex requirements for calculating deductions with these types of circumstances.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Purchase information on W-2 deduction calculations software from trusted sources. Although an unknown vendor may sell the program for less, the program may not function correctly or it may contain a virus.

Ever try to figure W-2 tax deductions with just a calculator and pencil? That's probably not feasible for you and your small business. Selecting a payroll software package is required to get the job done. Not only are correct and timely W-2 calculations important to your employees, but you also must meet federal standards, guidelines and timelines. With most software packages available at an affordable price, it would be silly not to consider a payroll software program to lessen the burden.

With so many software options on the market, how do you choose? Seeking payroll software: W-2, deduction calculations advice and ratings may be a logical first step along with considering the other information in this guide.

1. W-2 deductions can be made correctly and automatically through payroll software, taking the tedious math out of the equation for your HR staff.
2. Tax tables can be downloaded or are already in payroll software to apply W-2 calculations to individual employees.
3. Information on W-2 deduction calculations include a variety of factors from tax rates to an employee's filing status and the number of dependents and exemptions claimed.

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Read reviews on payroll software with capabilities of W-2 form deductions

People are always up for giving their opinion. And you can find user reviews of payroll software online. It's important to read through reviews with the understanding that you're not always going to experience the software in the same way.

I recommend: Smarter allows users to post reviews of Intuit QuickBooks Pro 2009. Taxes In-Depth gives a review of TurboTax Business and gives additional advice to those considering this payroll software package.

Evaluate rankings/ratings provided for W-2 deduction calculation software

In a quick glance, you can see how a certain product measures up through its rankings or ratings. Most ratings are based on a one-to-five star scale. Be aware that while you can find rankings and ratings on the Web, each site may base their rankings on different criteria.

I recommend: RateItAll allows users to rate their experience with payroll software. Check out the ratings given to Intuit QuickBooks Online Payroll Service through Epinions. Not only is it given an overall rating based on five stars, but users can also rate security and customer support.

Compare W-2 tax deduction information from different software options

Once you've done your research and carefully evaluated reviews and rankings of payroll software products, it may be helpful to compare products side by side. This way you can look for specific features and compare price. Once you narrow your options to two or three you can try out the software for free with a demo.

I recommend: See a comparison of the Top 10 accounting software packages from TopTen Reviews including whether or not the software can print W-2 and W-3 forms. Select products you are interested and then you can compare them through CNET.

Manually determining payroll deductions can be a tedious process that leaves a great deal of room for error. Payroll software automates the task of determining W-2 amounts and deduction calculations, which can improve the efficiency and productivity of your payroll processing. Some payroll software applications also offer check printing features. Unlike outsourcing payroll processes, payroll software allows employers to maintain full control of how their payroll is handled.

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Software-as-a-Service (SaaS)

Software-as-a-Service (SaaS) allows employers to manage and run payroll whenever they want without the hassle of installing, updating or maintaining payroll software. This service offers more flexibility than completely outsourcing payroll, while still allowing an employer to maintain complete control of the process.

I recommend: Learn more about SaaS at Ultimate Software.

Magnetic ink character recognition (MICR)

Magnetic ink character recognition (MICR) check printing makes checks readable by scanners and other character recognition devices. This can be offered as an additional feature of payroll software and allows you to print payroll checks from your own laser printer.

I recommend: Read more by visiting Medlin.

E-file

E-file, or electronic filing, is a process in which payroll tax information is submitted to the Internal Revenue Service electronically. Some payroll software providers offer this service as a feature of their applications.

I recommend: Learn more about e-file at eSmart Payroll.

Authorized IRS e-file provider

You must work with an authorized provider to use e-file services. A business is considered an authorized provider if it has received permission to participate in the IRS e-file program.

I recommend: Read more about IRS e-file providers at HalfPriceSoft.

Payroll taxes

All payroll checks must include deductions for federal, local and state taxes. Employers are responsible for withholding an accurate amount of taxes from each payroll check. Many payroll software solutions include features that allow you to easily calculate deductions and accurately determine annual earnings for W-2s.

I recommend: Learn more about payroll taxes at PayCycle.

Federal Insurance Contributions Act (FICA)

The Federal Insurance Contributions Act (FICA) is one component of federal Social Security and Medicare taxes. Many payroll software solutions that include W-2 and other deduction calculators will automate the process of determining the amount of FICA owed by employees and employers.

I recommend: Read more about FICA at Symmetry Software.