Doing payroll is an overwhelming and hard job to do. This is because there are things you must watch out for like state taxes, federal taxes, and local taxes. These do make payroll complex and have a higher risk of mistakes and errors which will prone companies to major liabilities. There are payroll services for small business that will guarantee to avoid these mistakes. But if you are confident in your own payroll specialist then here are the payroll mistakes that they must avoid to lower risk, boost employee morale, and enhance compliance.
Deadlines Are Missed
Taxes must be reported and paid to the government on certain dates, specifically monthly, quarterly, or twice a week. If you missed paying taxes on time, there will be penalties which range from 2% to 15% of the past amount due with interest included.
Another error to avoid is submitting the wrong amount of payroll tax. If this happens, this is also penalized especially if this has happened before. Fines can be up to 10% of the overall payroll.
It is crucial to be able to distinguish the status of each employee since they are the main subject of the withholding tax. There is still a chance to correct employee misclassification but you will not be safe from fines for a percentage of backdated payroll taxes.
Inaccurate Information of Employees
The government needs to have accurate employee data when payroll is being processed. It is important that you have the right hourly rates, name, and date of birth when you set up an employee.
Late Payroll Process
Failure to comply with the payroll deadline will give a negative impact on the morale of employees. Employees can complain about this and an audit will be issued. You will likely not pass the audit especially when you have late compensation so there are bound to be penalties and fines.
No 401(k) Contributions
If your firm offers the benefit of sponsoring 401(k) plan, it is apparent that you make well-timed contributions. If it is not defined in the documents of the plan, then deposits must be made soon after you withhold money from the wages of employees. At the latest, it should be the 15th business day of the month after withholding contributions. If not observed, there will be penalties under the labor laws.
No Proper Payroll Records
Employers are required by the federal and the state to keep payroll records such as overtime pay and minimum wage documentation. Make sure to keep in mind the requirements for record keeping of the payroll process.
Incorrect Handling of Garnishments and Child Support
You must make sure that you are withholding tax levies, child support, and other garnishments, then submit the payments according to the instructions regarding remittance. This is when an employee has a debt and it must be collected from his/her salaries.
Those are eight mistakes that everybody who does payroll must avoid in order to prevent problems. There are payroll services for small business out there that will offer their services but just make sure you know that your payroll process follows the labor rules and regulations to avoid fines.