Business owners juggle many responsibilities, and this often means that some tasks get less attention than others. Payroll, however, is one task that should always be a top priority. To help ensure that your employees are paid well and on time, QualityHow shares how you can correctly manage payroll by avoiding these common mistakes that can be detrimental to your business.
1. Making Mistakes While Running Reports
There’s a lot of potential for slip-ups in statutory and non-statutory reports, and the instructions provided for running those reports are complex. Moreover, several types of reports must be accurately filed for each employee at various times of the year. Errors on these documents can be as simple as leaving out vital information or getting sloppy with the details.
2. Missing Federal Deposit Deadlines
At one time, you could depend on tax forms to arrive by mail, reminding you of upcoming deadlines. Today, you need to keep track of those dates on your own. As with other payroll errors, you could face late charges and penalties. You may also find yourself in legal trouble. If you don’t file your business’ taxes on time, Klasing Associates notes that you might even be accused of tax evasion. If a business doesn’t file taxes, then it gets charged with a failure to file a penalty, and it will have to pay fines.
3. Mixing Up Types of Workers
There are two common worker classifications: employees and independent contractors. When workers are classified incorrectly, they may miss out on wages. The IRS will seek missed tax revenues, and you’ll end up paying any missing wages and taxes, as well as penalties and accrued interest.
Employees are also divided into two classifications: exempt and non-exempt. According to The Spiggle Law Firm, exempt, salaried employees are usually not eligible to receive overtime pay if they work more than 40 hours a week. The laws regarding who can be exempt vary by state — check state laws to avoid this mistake.
4. Using the Wrong Tax Rates
Tax laws are constantly changing, so it is easy to pay the wrong rates from one year to the next. Again, this mistake can leave you with overdue taxes and hefty penalties. You need to update your knowledge of the current tax rates every year in many areas:
- Federal income tax
- Federal unemployment tax
- Social Security tax
- State income tax
- State unemployment insurance tax
- Local income tax
- Medicare tax
Although researching tax rates can be complicated and time-consuming, it is essential for the well-being of your business.
5. Falling Behind Schedule for Payroll
Whether you’re facing a downswing in your profits or unexpected expenses, you cannot push payroll back to ease your finances. Your employees rely on their paychecks to meet their own expenses, and a consistent payroll schedule is important for maintaining employee trust and loyalty. Falling behind can hurt workplace camaraderie and lead to non-compliance with state requirements.
6. Calculating Wages Incorrectly
This mistake is particularly common when it comes to overtime. According to the Fair Labor Standards Act, any hours worked beyond 40 hours within a workweek must be paid at time and a half — your state may have additional requirements.
Your Solutions
Staying on top of payroll is crucial for helping you avoid these common mistakes. An online payroll service has features to improve the efficiency and accuracy of your reports and can complement your accounting efforts. For example, with auto payroll, you can save yourself hours a week to spend on other areas of your business. It’s truly among the best tech investments you can make for your business.
It’s common to make mistakes while running payroll and reports, but the consequences are often very serious. Working with professional payroll services is a good way to ensure the accuracy of payroll, so you can avoid non-compliance, hefty fees, and a lot of extra work.
