How to Fix 3 Common Payroll Mistakes
Mistakes on your business’ payroll can get you into trouble with the IRS. Your intentions may be in the right place, but even a simple error submitted for review can come with many penalties and fines.
Don’t panic just yet! There is good news. Today we will be discussing 3 common payroll mistakes and how you can make sure they don’t happen to you.
Payroll Mistake 1: Late Payroll
Within every state, there are requirements for payroll frequency. This means that you must pay your employees on a specific frequency, either monthly, weekly, biweekly, etc. Failure to pay on time can mean two things.
First, not paying your employees on time can more than likely cause them to lose trust in you. It can also cause issues considering many employees rely on their paychecks to make bill payments and survive. Secondly, this action could make you non-compliant with the regulations set in place by your state, which can, in turn, get you into trouble.
To ensure that this does not happen to you, pick the pay frequency that works for you and your employees within your state regulations. Next, set reminders to make sure the task gets completed on time. Make sure to account for the processing time as well; this will also help ensure your employees get paid on the right day.
Payroll Mistake 2: Paying the Wrong Tax Rates
The government can change different aspects of payroll as they see fit. Tax rates are one of those things that change periodically. If you are not aware of the current tax rates, this could make payroll even more complicated. Taxes that typically have yearly updates include:
- Social Security tax
- Medicare tax
- State income tax
- State unemployment insurance tax
- Local income tax
- Federal income tax
Paying the wrong rates could put you in a situation where you will become responsible for paying any of the owed taxes, penalties, and interest charges, so it’s crucial to stay up-to-date on any changes that occur.
Payroll Mistake 3: Wrongfully Classifying Exempt Workers
When your employees fill out their W-4 form, they will fall into two categories; Exempt or nonexempt. There are regulations made under the Fair Labor Standards Act (FLSA), which gives employers a guideline on classifying their employees. The FLSA requires that exempt employees must meet all three of the following criteria to be classified as exempt, which are as follows:
- The employee must make $35,568 annually or $684 per week
- The employee is paid on a salary basis
- The employee’s job duties fall into one of the three categories; executive job duties, administrative job duties, and professional job duties
On the other hand, we have nonexempt employees. The FLSA protects these employees and ensures that they must be paid the federal minimum wage and receive overtime pay for hours worked over 40 hours a week. Always check with your Wage and Hour District Office to determine your state’s minimum wage laws and overtime pay.
Failure to improperly classify your employees could mean you would need to pay them back wages from any overtime that they missed out on because of your mistake.
It’s human nature to make mistakes; we are not perfect and slip up now and then. No matter how many times you review documentation and numbers, there is always room for errors. Instead of adding to the payroll stress, allow us at Vision HR to relieve the stress that payroll brings. Our team of professionals has years of experience and are ready to help your Deland business with all of your payroll needs; contact us today!
