An accurate payroll starts with a good hiring process that supports payroll compliance with the right information captured in a timely manner. A written procedure for gathering new hire information helps organize the on-boarding process. Create a checklist to use so it’s easy to collect all the identification and payroll information required. Include tasks such as getting valid current identification, verifying social security numbers, completing tax withholding forms, and explaining timekeeping and pay periods.
Understand Employee Classification
A common challenge for employers is proper employee classification. It’s important to understand employee classification, especially for temporary and seasonal staff that often gets mis-categorized as independent contractors when the type of work they do doesn't qualify for independent contractor status. The criteria for determining independent contractor or employee status depend on the business relationship between the employer and the person performing the service. A payroll vendor or online payroll processing service can help you understand employee classification for compliance with employment tax obligations.
Keep an Accurate Paper Trail
Payroll taxes are a serious responsibility for employers that can have expensive and complicated consequences if not tracked and submitted according to legal requirements. Keeping separate financial accounts for paycheck withholding funds for federal, state, FICA (Social Security and Medicare taxes), and FUTA (unemployment taxes) makes it easier to access and document an audit trail for required reporting and tax submissions.
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