Common Payroll Mistakes Is it time to outsource?

by George Simpson | Sep 26, 2018 | Business News

According to the IRS, each year 40 percent of small business owners who handle their own payroll taxes pay penalties for late filings and mistakes. Tax penalties can be expensive, requiring interest and fines on the amount overdue.
The IRS and California’s Employment Development Department’s payroll tax laws are complex. Thus, dealing with payroll taxes on your own may eventually cost you. If you plan to continue handling payroll taxes yourself, you should be aware of mistakes and how to prevent them. The following are a few major ones:
Misclassification of employees: If you are paying individuals as subcontractors, make sure you are doing so correctly and can prove the classification is correct.
Miscalculations: Employers are responsible for proper payment of Medicare, Social Security, and income tax. Make sure you withhold the correct amount and understand how much you, as an employer, need to pay. If your employees work overtime, you must comprehend the complexities of California overtime laws and carefully follow them.
Rushing through payroll processing: You could under or overpay employees and be fined for mistakes.
Incomplete paychecks: You need to provide employees a record of all deductions and how you calculated their net pay.
Depositing late: Follow the correct IRS schedule guidelines for your business, which is either semi-weekly or monthly. Failure to deposit on time can mean penalties.
Failing to properly keep records: Keep accurate records for at least the most recent three years. If you fail to, you do not want to be audited.
Employees working out-of-state: You will likely be required to register in the employees’ home states.
If you have questions concerning payroll taxes, or wish to determine whether you should consider a payroll service, contact us.
For more information concerning Professional Tax Services, call 661-259-1967. Through the EZ2 Thrive program, Professional Tax Services provides unlimited complimentary advice on income and payroll taxes. For information on how you can receive advice at no cost, visit www.scvprotaxservices.com.

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