5 Common Payroll Mistakes And How To Avoid Them
1. Misidentifying Employees
Understanding your workers’ status is critical to successfully completing payroll. Are your workers employees or contractors? Are they exempt or non-exempt? Don’t make your best guess – these classifications come down to the legal guidelines created by the U.S. Department of Labor.
How To Avoid It: To protect your business and avoid steep financial and legal penalties, be sure to familiarize yourself with IRS rules, classification guidelines, and your state’s rules. Hiring a bookkeeper or accountant to help with payroll can help ensure you’re correctly identifying your workers. If you believe you’ve misclassified a worker, reach out to a reputable payroll expert for assistance. 4Corner’s accountants can help you with payroll and support you in the case of an audit.
2. Missing Deadlines
A payroll calendar helps you make sure everyone gets their paycheck on time. Plus, the calendar should help you report and deposit payroll taxes to federal and state organizations on time. If you miss a payroll deadline, your business could face financial penalties and interest charges, as well as a team of unhappy employees.
How To Avoid It: Outsourcing your payroll to a professional business services firm is a cost-effective way to stay on top of payroll deadlines. With professional payroll services, you can rest assured you’ll never miss a deadline without the expense of adding a full-time member to your team.
3. Miscalculating Overtime
As outlined by the Fair Labor Standards Act (FLSA), employers must follow specific federal overtime guidelines, as well as adhere to state and local laws. Recent trends show that misclassified employees who were denied overtime are beginning to take legal action against their employers at a higher rate and receive higher settlements.
How To Avoid It: Make sure you’re following your state and local guidelines when it comes to paying overtime. To help you make sure you’re following your state laws, take a look at the Department of Labor’s overtime guide.
4. Keeping Poor Records
Sloppy recordkeeping and data mistakes may seem like no big deal in the moment, but they can add up to millions of dollars in overpayments and government penalties. In the case of an audit, you’ll need to show accurate and historical payroll records from the past three years or longer.
How To Avoid It: Organizing and tracking timesheets, payroll files, W-2s, I-9s, and other employee tax forms can be a full-time job. A professional bookkeeper can help your business maintain pristine records and develop a payroll recordkeeping system that works for your business.
5. Failing To Report Taxable Compensation
Payroll isn’t as simple as reporting your workers’ hours and wages. If you provide stock options, travel benefits, employee discounts, reimbursements, or other fringe benefits, you’ll need to report them.
How To Avoid It: Review what kinds of employee benefits you offer and compare them to the IRS’s reporting requirements. To make sure your payroll is done correctly, ask a professional accountant or tax preparer to ensure you’re accurately reporting any unconventional benefits.
The best way to avoid unnecessary payroll mistakes is to hire an expert. Contact 4Corner today to learn how we can support your business’s payroll process.
Payroll Services With 4Corner
By staying up-to-date on changing employee and tax laws, 4Corner’s trusted payroll solutions can save you time, money, and a lot of stress.