3 Payroll Mistakes you can Avoid in 2019
Everybody makes mistakes. But when it comes to payroll, mistakes can be detrimental. Many small business owners struggle with payroll due to the number of regulations and rules that apply. One of the scariest things about payroll mistakes is you may not even realize you have made one until the IRS smacks you in the face unexpectedly. To ensure 2019 is a year of little to no payroll mistakes, read on about the most common mistakes made in small business payroll departments.
Employee Misclassification
At first glance, it may not seem like a big deal if you classify an employee as exempt rather than non-exempt, but it is a huge deal where tax agencies are concerned. Employees who are exempt are ineligible for overtime while those who are non-exempt are eligible. If you mark an employee as exempt who is not, the employee may miss out on wages. It is also important to carefully evaluate your W-2 and 1099 employees. Different classifying rules apply to independent contractors. To avoid this, know the difference between different types of employees. If you are confused, it is a good idea to reach out to your accountant – or we can help!
Late Payments
Paying payroll late is a bad idea. Not only will you have upset employees but you may also be at risk of breaking compliance laws in your state. To avoid this, set a payment schedule that works for you and your employees and stick to it. Keep in mind that some states have payroll scheduling requirements by industry.
Failure to Pay Taxes Correctly
Taxes can be tricky and are ever-changing. In the field of payroll mistakes, one of the biggest areas of error happens when it comes to properly paying taxes. If you do not pay your taxes correctly, you have to make up payments as well as face penalties and interest. Stay up to date with your required taxes at all three levels (federal, state and local) for your business in order to avoid problems associated with penalties and trouble. Check at the beginning of each year to determine if any rates have changed, including Medicare tax, Social Security tax, federal income tax, state income tax, federal unemployment tax, state unemployment insurance tax and local income tax.
Processing and filing payroll accurately can be complicated. If you feel overwhelmed, reach out to us today. We are always here to help.