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Avoid These Payroll Mistakes

3/4/2015

 
Payroll Mistakes
Payroll mistakes such as under or over paying employees or being late with paychecks cost employers in more ways than you might realize. They lose employees’ trust. They lose accuracy in their accounting systems. And they can lose money to IRS penalties. Many small businesses incur payroll-related IRS penalties each year, to the tune of $4.5 billion in 2013 according to the 2013 IRS Data Book. It’s important to establish an accurate and efficient payroll process and avoid common payroll mistakes. 

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Set Up Errors
To process timely and accurate payroll, it must be set up correctly from the start. Proper business registration, accurate calculations for local, state, and federal tax withholding, and proper employee classification are required for accurate payroll. If these things aren't set up in your accounting systems correctly your wage and hour calculations for paychecks will be problematic. Withholding the incorrect amount from employees for income taxes, Medicare, and Social Security can get you in big trouble with the IRS. Classifying employees as independent contractors can cause headaches with the IRS and state as well. Be sure to use the IRS Common Law Rules when classifying workers. 

Payroll Delays

Payroll delays can mean paying the wrong amount to employees, throwing off your general ledger balances, and losing the trust of your employees. Payroll delays can also lead to late or incorrect payroll tax deposits and costly IRS penalties. Establish and adhere to a regular pay period and dedicate payroll staff to timely payroll processing or outsource your payroll and avoid the problems that come with payroll delays.  

Not Updating State Unemployment Rates

State unemployment rates (SUI) may change over time and you need to use the current rates. When rates change, you need to update them in your payroll system to ensure accurate withholding and payments to avoid state fines and backtracking with your accounting system to straighten it out.  

If you’d like to explore the option of outsourcing your company’s payroll needs, please contact us at info@simplicityus.com or call 1-844 MY ACCTG.  Simplicity Consulting is a professional accounting and administrative services firm run by a talented team of professionals. With a combined experience level of over 40 years, we provide high-quality, innovative services to small and medium sized businesses.


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