Common Payroll Tax Mistakes and How a Payroll Software Reduces Errors

If you are a small business owner responsible for completing payroll, you may have made your share of payroll tax mistakes. Payroll takes careful attention and a certain degree of expertise to avoid mistakes. However, the right payroll software can make the process more manageable for business owners. AMS payroll software is a great investment for any business looking to improve their payroll process and reduce the chance of costly errors.



Most Frequent Payroll Tax Mistakes

  1. Misclassifying Employees – Employers need to distinguish between their employees and their independent contractors. If you misclassify your employees as contractors or vice versa, the payroll taxes for those employees will be incorrect. As an employer, you pay payroll taxes for employees but not for independent contractors.
  2. Missing IRS Deadlines – The IRS has employment tax deadlines. Employers must submit payroll taxes on a schedule aligned with the IRS deadline. The IRS may impose fees on late payments.
  3. Calculating Wrong Overtime Wages – Employers must account for any overtime their employee’s work. They need to accurately calculate the right rate for overtime wages according to state and local laws. Any miscalculations in this step will impact an employer’s payroll tax payments.
  4. Incorrect Tax Rates – Federal, state, and local tax rates can differ, so employers must use the correct tax rates when calculating payroll taxes. For example, the federal tax rates for Social Security and Medicare can be higher or lower than a state’s income tax.
  5. Keeping Inaccurate Records – Inaccurate records contribute to all the other payroll mistakes. If you do not keep organized and correct payroll records, mistakes are likely.


How to Fix Payroll Tax Mistakes 

The IRS provides a useful clarification between contractors and employees. Employers can use the characteristics of each type to correctly classify each worker to avoid paying incorrect payroll taxes. Carefully recording the IRS tax deadlines can help employers manage the payroll timeline. For any missed payments, employers must pay what they owe to the IRS to fix that mistake.

Employers cannot prevent every payroll mistake. However, they can take steps to make their payroll process more streamlined and organized. Accurate payroll records are just one of the best safeguards against mistakes.


AMS Payroll Software Makes Payroll Easier



A payroll software can improve your business’ payroll operations to reduce payroll tax mistakes and increase efficiency. The payroll accounting software from AMS has all the features an employer needs to successfully manage payroll and limit major payroll mistakes. The module approach enables you to build your ideal software tool to make the products the most useful for your operation.

AMS payroll software allows employers to create employee files with correct employee classifications. Additionally, the software supports federal payroll forms so that you can process all of your payments to the IRS in one place. When tax season arrives, employers can easily transfer accurate payroll information to tax forms to make tax season less of a burden. AMS software and the library of payroll resources give employers the tools to complete payroll. You can access a free demo of AMS software to try our products for yourself before investing.

Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.