This means whoever is managing payroll is responsible for deducting the appropriate amount and sending the payment to the appropriate recipient. If this process is mishandled, it could mean trouble for your employees. Year-end is hectic as heck for many business owners (including myself). And with all of the hecticness, it can be easy to get caught up in other tasks and forget to send out tax forms (e.g., Form W-2) to your team. Part of your role as “employer” is determining if a worker is a contractor (1099) or employee (W-2). And if you misclassify employees, you could wind up with a lot of issues down the road (like penalties and interest for unpaid taxes—big yikes).
File Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. When you file Form SS-8, the IRS notifies you of the proper employee classification. Download our FREE guide, Avoid These 10 Common Payroll Mistakes, to get access to mistakes 6-10. Accurately anticipating staffing needs is crucial in today’s highly competitive marketplace.
Having a few reports running before payroll can also help catch potential mistakes or prevent them from happening. A payroll checklist is another helpful tool to keep track of all of the steps in the process. Your administrators can use it to keep track of all of the details and ensure that everything is accurate. However, not all https://accountingcoaching.online/ fringe benefits are subject to all payroll taxes. For example, employer health insurance plan contributions are exempt from federal and payroll taxes. The line between employees and independent contractors can get blurry, so meet with a CPA to set boundaries in your workplace that distinguish between the two groups of workers.
How to correct payroll errors
For example, federal payroll taxes generally have two deposit schedules – monthly and semi-weekly – based on your lookback period. And if you miss these deadlines, the penalties could be as high as 15 percent of the past due amount, plus interest. For state payroll tax schedules, check your local taxing authority so you don’t fall behind. The payroll process can be error-prone, but keeping missteps to a minimum is crucial for the benefit of your employees and your business as a whole. The first step to avoiding mistakes is to be in the know about what they are.
While Massachusetts, California and New York have pushed to protect equal pay, states like Florida, North Carolina and Alabama have close to nothing on the books. In today’s tight labor market, hiring the right person for the right position is even more critical. PropelHIRES considers the culture of the company and the demands of the specific position, along with the experience, qualifications, and personality, to find a fit that lasts. This means less turnover, higher productivity, and ultimately greater growth.
- Misclassifying an employee can result in back wages for unpaid overtime, hefty fines and potential lawsuits.
- Without complete, updated records, you risk miscalculating pay, misclassifying employees, and more.
- And, you may owe back wages to the employee if you paid less than the minimum wage.
- If you are looking to outsource Paychex can help you manage HR, payroll, benefits, and more from our industry leading all-in-one solution.
- Even in the worst-case scenarios, there are ways that accountancy firms and HR professionals can solve issues and keep everything all running smoothly .
Discover the power of labor forecasting, the key to optimizing your workforce. Wherever the errors occur, pinpoint the problem and offer mandatory training to close those knowledge gaps. Being able to spot the source of errors, particularly repeated ones, can help you pinpoint areas where additional staff training can help eliminate them altogether.
Not remitting payroll taxes and quarterly filings
What payroll errors should you be aware of so you can avoid them? Not filling out or filing employee tax forms correctly also impacts your ability to pay the company’s payroll taxes accurately. This is not only a compliance issue for the business but can also result in you owing the IRS a lot of money. There are other rules to follow based on what applies to your business. Generally, smaller businesses can’t justify the expense of an employee dedicated to payroll issues.
Do you scramble at the last minute every pay period to find the info you need to run payroll? If so, you may be making a mistake and it may be time to reevaluate your payroll process. So even if the error stems from bad data, i.e. a manager forgets to log an employee’s sickness, or HR forgets to tell payroll about a new starter, payroll has to deal with the blame. If the error is due to manual data entry, this is a mistake that sits with whoever processes the payroll. When you make a payroll mistake, the first thing you feel is probably a cold wave of panic. After all, payroll mistakes can leave employees struggling to pay their bills and can also damage the trust between employer and employee.
But you also need to mark your calendar to ensure that you report and deposit payroll taxes to federal and state agencies in a timely fashion. Making a late deposit can result in fines and interest charges. A smooth payroll process in your organization is like oxygen—when it’s there, you hardly notice it; when it’s missing, you can’t think about anything else. That makes payroll one of the least appreciated yet most important functions within a business. Payroll, when done well, can keep employees satisfied and help your organization avoid legal consequences.
Misclassifying employees
From errors experienced by 1 in 4 employees to late paychecks at 32% of smaller businesses it’s clear payroll mistakes happen. As a business owner, mistakes like this can keep you up at night. Luckily, there are steps you can take to reduce the likelihood of payroll problems as well as minimize their impact on your employees and business.
Poor time tracking software can also contribute to overpayment or underpayment. A payroll correction is also required when an adjustment is needed to be made to a payroll amount and may take longer than anyone would like. Take preventive steps to identify and rectify payroll errors before employees or tax authorities are asking you questions. You’re committing a payroll error when you fail to include taxable fringe benefits in employee gross pay.
Even if you’re not a certified public accountant or a business major, hiring someone to help you set up a payroll system, for this reason, is a good idea. Aside from keeping track of employee hours, a payroll system can also help you manage various factors such as employee contributions, 401K plans, and bookkeeper wage garnishments. A smooth payroll process is one of the most important functions in a business and it can help keep employees satisfied. If you’re overwhelmed by running payroll yourself and are considering options to lessen your burden, you may be thinking about using a payroll outsourcing company.
Before Chris has wiped the crusties out of his eyes, you’ve already let him down. If you fail to pay overtime and refuse to correct it in a timely manner, you face a Department of Labor fine of up to $2,074. Many employers entrust their payroll to a competent provider, reducing the likelihood of errors even more. However, make sure you are going with a payroll provider with strong financials and one that has been in the business for at least 10 years.
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