One of the most important factors in payroll processing is staying compliant with the IRS and keeping your client’s business running both smoothly and organized.
Common payroll tax mistakes can cost your clients large penalties. The good news is, they can be avoided. There is no room for error when processing payroll so paying attention to details will help reduce the risk of the following common errors.
1. Incorrect Payroll Tax Return Filings
There are a multitude of Federal and State returns that must be filed for payroll taxes. These may include withholding, unemployment, local and school district taxes. Furthermore, there are many different reporting requirements. If proper procedures are not followed and filings not submitted by the deadlines, costly penalties and interest can be assessed.
2. Be On Time In Making Your Deposits
As an employer, you withhold taxes from the employee and have employer contributions to make. The important thing to know is when these deposits are due and how they must be paid. Federal and State levels determine compliance on when and how payments are to be paid. If your payments are late, stiff penalties and interest can be assessed.
Visit www.irs.gov for deadlines and methods of payment for deposits.
3. State Unemployment Insurance (SUI) Rates Not Updated To Current Year
State Unemployment Insurance Rates are updated annually by most states. These new rates should be updated in your payroll processing software to ensure your taxes are properly paid. If you underpay these SUI taxes, penalties and interest are going to be assessed.
Visit 1099-etc.com for more information on how our software processes payroll and assists you further with being compliant and organized.
4. Poor Record-Keeping and Data Entry
Matching employee names to incorrect Social Security numbers is among many common payroll mistakes. In fact, it’s so common that the Social Security Administration established a special verification phone number. Data entry mistakes – from employee identification to payroll calculations – cost companies money and can result in additional government penalties. If you’re worried about keeping your data in order, AMS Payroll is a good option.
5. Misclassifying Workers
Trends indicate a growing number of temporary employees, consultants, and independent contractors at companies across the country. When entering this data, it is imperative that you choose the correct worker classification. This will determine how you must report payroll information for tax purposes.
6. Neglecting to Save Payroll Records
While it varies from state to state, payroll records, which can include time sheets, cancelled checks, and W-4 forms, must usually be held for anywhere from four to six years. Additionally, employers will need to adequately back up this data in the case of an emergency. A software tool is a great way to maintain these records safely and efficiently.