Payroll is one of the most important aspects of business. Whether it’s your first year operating your own business, or you’ve had your business for years, your employees expect to be paid in a timely manner. However, mistakes happen. Whether you use a third-party platform to run your payroll or have a personal bookkeeper, issues can arise. It is crucial to understand what mistakes can happen so that you can avoid them when possible – and fix them when they do occur.
Let’s dive in!
Payroll is the process of paying employees for a set period of time or for an allotted amount for the work being done. Usually, businesses will set up their payroll to pay employees weekly, bi-weekly, or monthly. To do this with the least amount of mistakes, you’ll want to make sure you’re paying attention to ensure that everything is being calculated correctly.
To be successful at all things payroll, you’ll need to:
- Take Accurate Records: Come tax time, the IRS will want to make sure that everyone on your payroll was taxed correctly. Inaccurate records can lead to problems for your business.
- Pay Your Employees: You’ll want to make sure you are paying your employees the right amount, taking out the appropriate amount of taxes, and getting their paychecks to them on time.
- Submit Taxes: The government will be expecting the taxes that you’ve withheld each time taxes are due. You must also file quarterly and annual payroll tax forms.
This encompasses the basics of payroll. Certain things can differ from business to business, so it’s important to make sure you understand how your business is set up so that you keep the best records of the necessary information.
Common Payroll Mistakes
Sometimes, mistakes happen, whether you hire a third-party agency to manage your payroll, employ a personal bookkeeper, or do it yourself.
From miscalculating wages or the taxes that should be withheld from a paycheck, these mistakes can cost you when an IRS is looking over your taxes. Your payroll might be incorrect if you miscalculate the wages you owe your employees or if you miscalculate the taxes you need to withhold.
Regardless of how your books are kept and how your payroll is done, as the business owner and employer, you are responsible in the eyes of the IRS. Let’s take a look at some common payroll mistakes, so you can avoid them (or handle them should they arise).
- Employee or Contractor?
You’ll want to make sure that you pick the right classification for your employees and contractors. For employees, you’ll pay taxes on their behalf, and they’ll receive benefits for working for your business. A contractor is an independent worker, separate from your business.
- Exempt or Nonexempt?
An employee is either an exempt or nonexempt employee. Exempt employees do not receive overtime pay; while nonexempt employees are eligible for overtime pay. In order for an employee to be ruled exempt, they have to meet certain qualifications. From earning a salary, to being essential to a business operation, these qualifications vary from state to state.
- Miscalculating Pay
When it comes to paying your employees, mistakes can happen. Whether it’s not realizing that someone deserves overtime (working over 40 hours a week) or forgetting to pay an employee for their unused time off. By keeping accurate records, you should also be able to track which of your employees have unused vacation time and ensure that they are paid correctly.
Taxes have to be paid. From knowing when they are due to paying the correct tax rate, you want to be sure you are buttoned up when it comes to taxes and payroll. This is why it is vital to make sure that the taxes you are withholding for your employees are accurate.
Owning a business can be daunting. From managing growth and sales to trying to keep your business afloat, payroll can feel like another task. However, if your payroll is accurate, you will have less to worry about when tax time rolls around.
No business owner can do everything alone. Often, delegating to experts is the best move you can make for the long-term health of your business. If you need help regarding taxation, check out Eco-Tax.
Trust Your Taxes to Eco-Tax, Inc
Preparing for taxes can be a lot of work, sometimes taking away from time spent growing your business. That is why we at Eco-Tax are here to help you!
To offer the best client satisfaction, our experts at Eco-Tax remain:
- Economical: We offer affordable, transparent pricing. Gain access to key services, industry experts & the technology you need to keep your business thriving.
- Experienced: Our CPAs, EAs, bookkeeping, payroll, and financial specialists have the education, training, and experience to help your business grow.
- Eco-Friendly: Working virtually allows us to go paperless. All documents can be quickly shared through our secure portal, and you can meet your accountant online anytime.
To learn more about how we prepare for taxes, contact us today to book a free consultation with one of our trusted advisors. We look forward to partnering with you!