Did you know that the penalty for filing taxes late is usually 5% of the unpaid amount for that month? Add that to the numerous penalties you can incur, and getting tax wrong becomes expensive. But if you run a business, how can you ensure you’re paying your employees right?
Luckily, it is easy with just a few simple strategies. Read on as we discuss five things to avoid when payroll processing.
Paying Employment Tax Late
Even the smallest of businesses may have numerous different pay structures. You may be paying some people to work part-time in a physical store on one wage and then pay another full-time higher salary to do remote office work. This can mean payroll management, and keeping track of their taxes becomes extremely tough.
Unfortunately, if you get them wrong or fall behind, it can be expensive. Keep track of them using a paystub maker so you know what you are spending on wages. By making sure you are paying the correct taxes, you will not encounter late penalties.
If you misclassify employees, then you will either under or overpay wages. This results in incorrect taxes, which we all know can cost you a pretty penny.
One of the most common forms of misclassification is over time. This is because specific laws state who should be paid and taxed, though other people can be exempt. You may even find yourself looking back through payroll records and paying back misclassified pay from a long time ago.
Incorrect Employee Data
As a business owner, you need to check that employee details are correct when joining your firm. If not, it can cause several headaches, such as incorrect tax payments and the employee not getting paid at all.
Set up a verification system when you are onboarding. You will need the correct name, bank account number, social security number, and other personal information for the tax form. Make sure these are complete before they start their first day of work.
Doing Payroll Using Wrong States
If your company has one location, residing in one state, this does not matter so much. However, it helps to know that each state has its tax laws. If you employ anyone from another state, the person will need to be paid according to the rules of the place they reside.
Keeping Disorganized Records
No one wants to face an audit. However, the time can come when it may happen. As a business owner, if you don’t have your records in order, you can face penalties and fines.
Avoid it by setting up a terrific record-keeping method. It may even help if you automate the process, buying the correct accounting and payroll software to help you out.
In summary, avoid payroll processing errors by doing all work ahead of time. Keep excellent records, and automate them if you need to. Check all information is correct before you continue.
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