Payroll can be daunting and the responsibilities faced by employers can be intimidating.
It can be very easy to make mistakes when carrying out payroll. Here are five areas to focus on to avoid costly errors:
Employee or contractor?
As an employer, it is your role to determine if a worker is an employee (W-2) or a contractor (1099). An employee is someone you hire and pay wages to, whereas an independent contractor is someone who runs their own business but also performs work for other businesses. Getting this wrong can lead to a whole host of problems such as penalties and interest for unpaid taxes further down the line.
Is your employee Exempt or Nonexempt?
Employees can either be exempt or nonexempt and you need to make sure you classify employees correctly by understanding their wages and duties.
Exempt employees are not protected by The Fair Labor Standards Act and cannot receive overtime wages, whereas nonexempt are and can.
Get the right tax rate
These can change on a frequent basis. Getting the wrong tax rate can mean that you have to make up the difference, pay late fees, penalties or interest. Ensure you keep up to date with rate changes or start using cloud payroll that automatically updates tax changes.
Don’t miss important payroll and tax dates
Tracking due dates for running payroll and paying employment taxes needs to be a top priority.
Allow yourself plenty of time and set reminders, or use a payroll service that does it for you. Needless to say, if you do forget, you’ll end up in a whole heap of bother with your employees and the government!
Keep good records
Part of your duties as an employer is keeping records of important documents. Not doing so will come to haunt you at tax time or during an audit.
Important payroll records include the following:
- Hours worked
- Time off
- Withholding forms
- Payroll taxes
- Benefits and deductions
- Gross wages
- Pay rate details
How we can help
With our small business cloud-based payroll service, we can advise you regarding all aspects of payroll preparation and compliance, making sure your calculations are correct and that you meet your deadlines and requirements. We can also offer advice on recruitment and staff retention, and provide human resource consulting services through one of our approved suppliers.
The responsibilities faced by employers can be intimidating, but we can guide you and your business through the processes, costs, calculations and deadlines and take care of everything for you.
To speak to a local payroll expert at TaxAssist Advisors, inquire online here to book your free, no obligation consultation.
Date published Aug 4, 2022 | Last updated Aug 5, 2022This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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