PAYROLL REVIEW

As we close out the 2^nd quarter of 2013 I wanted to share some common payroll mistakes that you should look for as you do your review before processing quarterlies and closing out any payroll quarter.  And even though we are slightly beyond mid-year it is still not too late for a mid-year checkup.  Many things caught now will save you much trouble between now and closing out 2013.

Many employers find that payroll can be not only a struggle but an area that causes them a great deal of stress. Employers found to be out of compliance often end up with large tax bills and penalties. Whether an employer does their own payroll or has someone do it for them, precautions should be taken to avoid some common mistakes.

1. Employees classified as independent contractors:

The IRS has strict guidelines on qualifications of the two types of workers. Taxes due, benefits eligibility and whether the worker is issued a W-2 or 1099 all hinge on this. If this is wrong it results in serious issues ultimately leading to penalties and fines.

2. Payroll Tax deadlines missed:

This mistake can bring serious penalties plus interest.  It’s important for an employer to know and understand what each payroll tax is and when each one is due.

3. Incorrect Payroll Tax Calculations:

It’s important to be sure that payroll tax calculations are correct. When using payroll software you must be sure that the payroll software has been updated with all current payroll updates. Also important to note: Employees can be set up incorrectly or current payroll hours, deductions, garnishments, etc. can be entered or setup and processed incorrectly. 

4. Garnishments:

Garnishments are always an unexpected issue that affects payroll processing.  Meeting and processing all of the guidelines and requirements of this legal document can be daunting. In addition calculations based on exempt and non exempt wages to determine the wages subject to garnishment can be easily confused. Employers failing to adhere to garnishment rules or to make garnishment payments on time are assessed fines.    

5. Inadequate Records:

The IRS has rules for what documents you must have on file related to your payroll.  But some employers don’t realize that the IRS also has rules on where certain employee forms must be kept, for example Form I-9.   While states and specific agencies vary, the one with longest term of retention is the automatic default.  The federal standard for retention of payroll and tax records, including time sheets, cancelled checks, and W-4 forms, is 7 years.

It is easy to see why many employers find payroll processing to be one of the largest headaches in their business.  This is why some choose to outsource their payroll headaches to someone else! 

There are payroll services that take on all of the responsibility of processing payroll for a business.  Some of these services will even assume the responsibility for correct payroll tax processing and payments accepting any fines or penalties for incorrect or untimely submissions, as long as the employer meets certain conditions that will allow the service to be unhindered in meeting payroll processing requirements. Most services will also process garnishments as part of your payroll.  

At Complete Business Solutions, in addition to accepting payroll processing responsibilities and processing garnishments, we make sure that our client’s employees are classified correctly and assist them in complying with all payroll and employee record keeping requirements.  And as an added bonus we do annual workplace posting compliance audits for our clients and provide them with a new Oregon All in One BOLI poster each January. 

If you need help with your payroll processing contact CBS today!