Engaging employees allows your business to function and grow. But doing so puts the responsibilities of the employer on your shoulders. The execution of these responsibilities can lead to penalties, and not taking advantage of the opportunities can cost you taxes, which can hurt your results. Here are 10 payroll errors to avoid.
Payroll errors to avoid
Give a comp time
When your non-exempt employees (usually hourly employees) work more than 40 hours a week, you owe them an hour and a half. You can not get around this obligation by giving them comp time (allowing them to remove overtime worked). This contravenes the Federal Act on Labor Standards (LSF).
Incorrect classification of workers
If workers are your employees, you owe payroll taxes on their wages and taxable benefits. You can not avoid these taxes by labeling workers as independent contractors if they are really employees. This can result in serious tax penalties as well as penalties from other federal and state agencies. Check the IRS advice on worker classification.
Delaying the last paycheck
When you fire a worker or quit, you owe one last payment. While federal law does not require you to pay the worker immediately, state law can. Review the rules in your state . Violation of these rules may result in sanctions or even prosecution.
Reimbursement of travel and entertainment expenses under a no-liability plan
If you reimburse employees for travel or entertainment expenses related to the business of the company, you may incur unnecessary employment taxes if you do not arrange for the refund properly. . If they just ask for a refund and you pay it, the refund is taxable for them and subject to payroll taxes. If, however, you adopt an "accounting regime", the reimbursement is not taxable to them and you do not owe social charges; you deduct the expenses of T & E. To be a responsible plan, you must follow the guidelines of the IRS.
Creditors Paying to the Government
If you are having a cash flow problem, make sure you put the IRS at the top of your list. If you choose to pay the landlord or other creditors instead of paying the social security contributions first, you can become personally liable for all such unpaid taxes, even if your business is incorporated or a limited liability company . Make payroll taxes a priority so you do not incur a penalty for recovering funds in trust.
Reimbursement of Salary Obligations
While some small businesses do their own payroll, others choose to let foreigners – accountants, bookkeepers, payroll corporations, and employers' professional organizations – handle the work of withholding, filing taxes and tax returns. Usually it works well, but there are bad people who do not respect their obligations and you are in trouble. Why? Because as an employer, you are responsible for all these payroll obligations. It's up to you to monitor their activities on your behalf. The IRS has a list of certified PEOs, which are companies that meet the IRS-set standards. The list is updated periodically.
Ignoring Unemployment Claims
When a worker leaves the company, he can apply for unemployment benefit. If the departure is voluntary, or if the worker was dismissed for serious misconduct (for example, sexual harassment of a colleague, being intoxicated, theft of the business), it is not necessary. 39, is not entitled to unemployment benefits. If you fail to dispute the erroneous claims, you risk paying unemployment tax unnecessarily. Check with your state on how to dispute an erroneous claim for benefits from a worker.
To be a bad archivist
The law requires you to keep payroll records and make them available to the IRS under certain circumstances. Usually, you must keep records for at least four years. These records include time sheets or other records of hours worked, expense accounts, copies of W-2s and I-9s, accident reports and other relevant payroll information. .
Failing to have new employees complete form 8850
By reviewing a new employee, you can find out if it belongs to a targeted group that would give you the right to claim the opportunity opportunity credit. Have each new worker complete Form 8850, an IRS form. It is used to pre-filter workers for credit purposes. The form must be submitted to your Employment Security Agency (SESA) no later than the 28th calendar day following the date on which the member of a targeted group starts working for you. If you do not do it, you can not take the work opportunity credit even if you would be entitled to it otherwise.
Posters missing from employment
You must post posters for some federal and state employment laws. If you do not do it, you can be penalized. The amount depends on the type of poster to display. Find the federal posters you need from the DOL poster advisor. Your state labor department can tell you which state law posters to use. Do not pay an outside company for them. Download the required posters on government websites.
Bank for Salary Reports via Shutterstock