Running payroll is one of the most important responsibilities of any business owner, but it doesn’t have to be the most stressful. Here’s a few tips we put together to help you avoid a few common payroll pitfalls-
If you have control over when and how workers work or your workers meet other criteria defined by the IRS and other federal and state agencies, these individuals may not be independent contractors. Plus: Non-exempt employees (whether considered salaried (which is not a best practice) or hourly) are entitled to overtime pay when applicable. You must familiarize yourself with the FLSA guidelines and ensure you are classifying and paying your workers correctly.
Make sure you always have a backup method of payroll records – run reports and keep copies of the records electronically or on paper. Consider implementing, and frequently auditing, an automated time and attendance system that syncs to an electronic payroll record to coordinate payment records and pay stubs and then make sure you are maintaining copies of those records.
Missing Deposit Deadlines
You must deposit your federal taxes on specific dates, but those dates are partly determined by the total taxes you report on Form 941. File late and you can end up with fees of up to 25 percent on certain payments.
Failing to Comply with Laws
Many federal payroll laws have changed in recent years; several states and municipalities recently adopted sick-leave mandates; and minimum wage requirements have a way of sneaking up on you. These changes make it easy to miscalculate your payroll and tax obligations or fail to file a required form — particularly if you employ people across multiple states or jurisdictions.
Failing to Report All Compensation
Payroll taxes aren’t limited to income. Most fringe benefits like stock options, achievement travel and employee discounts are subject to federal income and employment tax withholding, too. These forms of compensation must be reported to the IRS, or you could face significant penalties.
When your timestamps are on paper and your hourly rates are on spreadsheets, loading your payroll amounts can be a chore, and mistakes can happen. Enhanced integration of the payroll process — from time and attendance to tax payments to Worker’s Compensation payments — means time savings and fewer opportunities to make expensive errors.
Misprocessing of Garnishments
There are different rules for different kinds of employee garnishments (fines, taxes, child support, etc.). Failure to comply could result in fines, and employees may struggle to retrieve payments that were processed in error.
Outsourcing Payroll System
Doing payroll yourself is like any DIY project: a great way to save money if you have the time and skills to do it right. Although you may find that the time requirements and potentially costly mistakes can quickly become overwhelming, but don’t worry we’re here to help you! When you enlist our help, you’ll get a trusted adviser who knows your local, state, and federal tax requirements. You’ll not only save time, but we will make sure we’re getting up-to-date information on legislation, regulation, and compliance requirements so you don’t have to.