You Might Be Making These 6 Payroll Mistakes
An organized system to handle payroll activities is a crucial element of any business that has employees. Payroll encompasses a variety of components that your company must handle accurately and promptly. Just as there are many moving parts to payroll, there are as many mistakes people often make when managing payroll. MagicPay Merchant Services lists six of the most common errors.
1. Inaccurate Employee Information
Keeping accurate paperwork is an essential part of the payroll process. People often mismatch Social Security numbers and employee names, an issue that happens so frequently that the Social Security Administration offers a free verification service so employers can check their data against SSA records. Other information that may be recorded incorrectly include exemptions or the number of deductions on an employee’s W-9. Also note that your obligation is not only to keep accurate records, but also to keep them secure.
2. Incomplete or Sloppy Pay Records
Employers must keep a minimum of three years of detailed pay records. Reports need to include payment rates, hours worked and payroll dates. Many states have additional record-keeping requirements, so it is vital to know the regulations in your location. If your data is not in order or you are missing records, you could run into problems in the future.
3. Missing Tax Deposit Deadlines
Filing taxes for a business can be confusing and time consuming. However, it is critical to know and meet IRS deadlines. If you are late or make an incorrect payment, you may incur costly penalties. Create a calendar of scheduled deadlines and plan time to prepare, file and deposit your payroll taxes.
4. Making Errors With Reporting
State policies change often, and the person who handles your payroll system must keep up with new requirements. Many payroll mistakes result from not having adequate or correct information. Maintaining accurate data and running timely reports is a necessity for your business success. If you can run reliable reports, you can catch errors before you process payroll.
5. Miscalculating Pay
According to a survey by the Workforce Institute, over half of the U.S. workforce has encountered a problem with their paychecks. These mistakes include non-payments, over-payments, late pay and inaccurate payment amounts. Errors related to your employees’ paychecks frustrate your staff and result in a lack of trust. Staff members may file lawsuits against you, depending on the situation. Incorrect payments could stem from many issues, such as misclassifying employees (see below), incorrectly calculating overtime, inaccurate pay rate and more.
6. Misclassifying Employees
Accurately reporting payroll data for tax purposes requires correctly classifying everyone working for you. As NOLN explains, the classification determines protections, benefits, minimum wage and overtime pay rates. Employee classifications include exempt and nonexempt, within which are regular full-time and part-time, and temporary (contract) full-time and part-time. Another classification is for independent contractors, which are non-employee freelancers. Mistakes in this data can deny employees wages and benefits and miscalculate tax amounts as well.
The Benefits of an Online Payroll Service
One way to ensure your tools for accounting (payroll, reporting, taxes and payments) are accurate is to use an online payroll service. Utilizing a program that works together with your current operation helps you minimize errors and save time. Auto payroll features reduce the amount of time you must spend on your payroll each week. This service requires an initial setup process, but you can devote your time to other areas of your company once you program it.
Payroll is a crucial aspect of your company’s success. It affects the morale of your team, your financial stability and your business reputation. Professional payroll services play a vital role in keeping your records organized and accurate to foster the success of your organization.
Efficient management of payroll systems should be a top priority for your business. Keeping track of deadlines, ensuring accurate data, running reports and analyzing for errors is time-consuming and requires meticulous planning and attention to detail. Professional payroll services have the systems in place to handle your needs so you avoid costly mistakes.
Looking for solid and reliable merchant services and credit card processing? Let MagicPay Merchant Services be your payment processing solution for your business. Find out more today! 855-891-2600
Written by Elena Stewart