Payroll mistakes not only upset any affected employees or contractors, but they can also be very costly due to penalties and fees for noncompliance. To protect your company's bottom line and reputation with your workers, Payroll Setup invites you to keep the following in mind to avoid these common payroll errors.
State and federal regulations require small businesses to send in payroll taxes on a set schedule. If these are sent in late, your company will be fined and charged interest until the taxes are paid. InvestmentPedia warns against five different penalties small businesses can incur if they fail to follow all guidelines.
Many small businesses have one person handling payroll. This works fine as long as the employee stays with the job, but what happens if this worker needs a leave of absence or decides to take another position? It is important to have an additional person or, better yet, a payroll service to take over this important responsibility.
Payroll tasks require focused attention to detail when entering information. Data entry mistakes, such as a mismatched Social Security number and name, incorrect entry of work hours or failure to pay court-ordered garnishments, can cost your company money to correct the problem.
Many businesses include employees, independent contractors, consultants and temporary employees in their workforce. Each of these workers must be classified correctly for tax purposes.
Your company is required to send a 1099 tax form by January 31 to any independent contractor who earned $600 or more during the previous year. Unfortunately, many times these are sent out late.
Keeping up with the many changes to payroll taxes and laws is important to avoid penalties and fines. In 2020, legislation changed overtime rules by raising the minimum salary for exempt employees to $35,568 a year. This change qualified over one million American workers for overtime pay since their lower salary moved them to non-exempt status. Companies that do not implement this new policy face a potential lawsuit from affected employees in addition to government fines.
No matter the size, every business has to send accurate tax reports to federal, state and local tax agencies. Some reports are required quarterly and others must be submitted annually. Any mistakes made here result in costly fines.
One way to avoid these errors is to use an online payroll service to handle all the intricacies of the process. An online payroll service like Payroll Setup will collect the data needed for taxes in one, easily accessible place. Some payroll services also make it easy to set tax deadlines, so you don’t miss any important ones. Not only does your organization save time, but it also gives your company the assurance the payroll is completed accurately.
When choosing the right service for your company, look for one that automatically runs your payroll once you set it up and works in harmony with any other accounting services you maintain, such as a mobile payroll app that allows you to see every aspect of your payroll from anywhere you are.
Management of your company's payroll is important to your business, and any mistakes can be costly in fines and employee morale. It takes time and research to keep up with all the changing regulations around payroll processing so consider outsourcing this responsibility to a professional payroll service like Payroll Setup. Reach out today for a free consultation!
Post written by Katie Conroy. Katie is a guests contributor to the Payroll Setup Blog. She can be reached via her website below.
*All blog posts solely reflect the views and opinions of the author only.
Katie is a guest contributor to the PayrollSetup.com blog. Readers can follow her work on topics such as Health, Relationships, and Personal Finance here.