Running a business involves a lot of responsibility. You must manage employees, taxes, licensing, and payroll. Payroll is a crucial aspect of any business. Making accurate and regular payments to employees, paying taxes, and classifying employees correctly are all part of the payroll process. Although payroll may seem straightforward, it can be very complicated and confusing. Employers should avoid making simple mistakes when doing payroll. These mistakes can lead to delayed payment and even expensive fines. Here are some common payroll mistakes you should avoid.
The biggest mistake you should avoid when managing payroll is missing important deadlines. Not filing payroll on time can lead to delayed payment to your employees. Missing a deadline for federal or state taxes can also cause you to pay more in interest and fees. Depending on your state, you are also required to pay your employees on a certain schedule. Paying too late or too infrequently can cause penalties. A good way to help you stay on top of deadlines is to create a payroll calendar and schedule reminders for yourself.
Not Maintaining Your Records
It is essential to keep accurate records for your bookkeeping; failing to maintain them can lead to negative consequences. Maintaining proper records not only benefits you and your employees but also keeps you compliant with laws and regulations. Some common bookkeeping errors include:
- Not updating employee data regularly
- Inadequate employee information
- Not storing employee data for long enough
Making Incorrect Payments
Overpaying or underpaying employees does not happen often, but it can be very detrimental to your business. There are a few reasons you may give your employees incorrect payment. Data entry mistakes occur when documents are difficult to read or damaged timesheets. Incorrectly classifying an employee may also lead to incorrect deductions, such as withholding too much or too little from their paycheck. Using paper timesheets is an easy way to log incorrect hours for employees.
Incorrectly Classifying Employees
Small businesses also often use part-time workers, temporary workers, and even independent contractors. As a business owner, it is important that you accurately classify your employees in your records. Misclassifying an employee as an independent contractor, when they are part-time or full-time, can have detrimental effects on a company. As an employer, you are required to withhold a percentage of each employee’s paycheck to pay their social security, federal income taxes, Medicare, and unemployment taxes. Be sure to familiarize yourself with the IRS rules for classifying employees.
Contact Bowman & Company CPA Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim at decreasing your taxes and increasing your net worth through responsible, timely, and accurate recordkeeping. We offer our services to clients throughout the Washington, D.C. metropolitan area including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter, Linkedin, Facebook, and Youtube.