Paying your employees may seem like an easy task, but there are common mistakes that happen, that have costly consequences. Payroll errors cost company money, yes, but it can also tarnish a company’s reputation, not to mention, get them into trouble with the IRS.
These are the most common mistakes a business can make regarding payroll.
- Paying Incorrectly – Think it can’t happen to you? You’d be surprised how often it can and does happen in business. Always double-check that the payment amount was entered into the payroll system correctly, and check that the employee reported the hours properly.
- Bank Holidays – You need to know when they occur and plan accordingly. A Bank holiday is a lost business in terms of payroll processing.
- Payroll Taxes – The government collects payroll taxes on a pay-as-you-go basis, including federal and state, as well as any local taxes, as applicable. (An expert like Dunham Tax Professionals can inform you which of these will apply to your business.)
- Pay Frequently – There are state laws that dictate a minimum pay period. You are allowed to pay more frequently – if that’s feasible for your business – but are prohibited from doing less than the mandated minimum. In short, pick a realistic pay schedule and always stick to it.
- Late Payments or None at All – Again, stick to the pay schedule as obligated. Forgetting to process payroll, or processing it late, can create huge issues for employees.
- Employees Vs. Contractors – It may be that you hire contractors to do temporary work for you. That’s fine, but the designation of an employee or a contractor is a legal distinction – and misclassification can result in some penalties. (When in doubt, ask a professional, such as Dunham Tax Professionals)
- Maintaining Payroll Records – If a business owner fails to keep accurate payroll records, an audit may be triggered. Typical records that need to be kept include; copies of W-2 Forms, pay stubs, time sheets, etc. it is noteworthy that every state varies, but by and large, these documents must be kept for a period upwards of 3 to 4 calendar years.
- Staying Up to Date on Laws and Regulations – These laws and regulations are always changing. That’s why it’s so important to consult with an expert in these matters: Dunham Tax Professionals is available to help you navigate these complicated requirements, wherever your business is located, keeping you abreast of changes, and keeping your business current and moving forward.