Have you ever heard someone say payroll is a simple process or that it’s easy? If you have, we’d love to meet them! When thinking about payroll, we have to think of its vital importance to employers and their employees. It is the largest expense for a business, followed by health insurance. Employees need their employers to get payroll right. But as anyone who has worked in payroll before would say, it’s easier said than done. Trying to do payroll manually as a business is bound to cause mistakes. Mistakes happen, and some are easy to fix and not a big deal. Payroll mistakes, do not fall in that category. According to the American Productivity and Quality Center (APQC), organizations can take anywhere between 2-10 days to resolve a payroll error. Payroll errors have a cascading effect. You want to avoid them at all costs, or it will certainly cost your business! Below we’ll briefly discuss some common payroll mistakes. We encourage you to reach out to us here, at Perfect Balance LLC, if you have any further questions!
Common Payroll Mistakes:
1.) False Employee Classification
W-2s, 1099’s, independent contracts, non-exempt hourly, non-exempt salaried, exempted salaried, are some of the many terms used to classify an employee’s status with the IRS. Each classification has different tax rules that impact how payroll compensation is done by a business. Mis-classifying employees is one of the most common mistakes and will lead to many more mistakes, such as withholding and denying owed benefits. Get this one right with your employees, and it will save you time and money!
2.) Failing to Report All Taxable Income
Different forms of compensation may be viewed as ‘pro bono’ or ‘employee perks’ but it’s safest when these forms of income are accounted for. Failing to define income correctly will not only lead to withholding mistakes for the business but many others. Some examples of defined taxable income include: bonuses, club memberships, awards, and reimbursements among others. If you have questions, Perfect Balance is here to help!
3.) Being Late on Deadlines
Fines and penalties are dealt swiftly to businesses that fail to file their IRS forms or pay their taxes on time. It also affects your employee’s paychecks and creates headaches for them when a business misses important deadlines. Keep a disciplined calendar for filing with the IRS and making payments. Filing and payment dates can be determined through Form 941. Need help? Contact Perfect Balance LLC!
4.) Poor Record Keeping
One discipline that could reduce headaches and the time it takes to resolve an issue with payroll, is keeping clean and accurate records. Whenever a payroll error arises, your records will be the key to helping you get through it. Not only that, it is the first reference when dealing with any government scrutiny or the unfortunate case of an audit. Keep clean records. And if you need help, Perfect Balance LLC is here.
Payroll is a service that business owners need support with. Perfect Balance LLC is here to serve small businesses in the Racine and Kenosha area with payroll. Contact us today if you’d like to learn more!
Sources: Alan M Brown CPA, ADP, Fuse Workforce