After years of being a payroll provider for small businesses, The Payroll Department understands it’s a point of pride for small business owners to pay their employees. Most business owners are pleased to provide an income for their workers and their families. But handling that payroll can be a headache for entrepreneurs.
Mistakes can be costly!
When you are handling payroll on your own, making inadvertent errors or not understanding the nuts and bolts of payroll processing can cost you money in taxes and possibly penalties. And, mishandling payroll allocations and taxes that require adjustments at the end of the tax year means accounting fees add up, too. Watch out for these common mistakes:
Payroll dates. Check dates indicate when tax payments are due. Wages are reported for tax purposes based on check dates and filings must be consistent. Some employers assume wages are reported on based on pay period dates and that is not accurate. If check dates don’t match up with pay period dates, the possibility exists for payroll inconsistencies that an audit would catch and the result could be costly adjustments in taxes at year end. Not only that, but confusing dates could confuse employees who then claim they haven’t been paid for all the time they have worked. The other part about accurate payroll dates is some small business owners may assume that wages are reported
Payroll changes. It is common for changes to occur at every payroll run. It could be a change in pay rate, deductions, taxes or other benefits. If you don’t verify that everything is correct and calculating correctly, an error could be processed for some time before anyone discovers it. And then, trying to correct it might mean taking money back from an employee, adjusting payroll for employees over a period of time, or having to file additional tax forms and make payments. Employers and employees both could find themselves facing financial adjustments that hurt.
Payments outside the payroll process. Sometimes if an error is made or employers issue bonuses to employees, they write checks outside the payroll process and don’t include them in payroll calculations. This creates a huge problem with taxes and reporting since total payments and even the amount of taxes deducted could be inaccurate on end of year statements like W-2s and 1099s.
Our clients tell us that the payroll fees we collect for payroll services are well worth the peace of mind that comes with not having to worry with all the potential pitfalls of payroll processing on their own. Not only does it free up a lot of the time it takes to stay on top of wage and labor laws, it removes the headaches!
Don’t put yourself through that. Take two aspirin and call a payroll provider like The Payroll Department!
-Elaine of The Payroll Department Blog Team