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Handling payroll can be a difficult proposition.
Handling payroll can be a difficult proposition. After all, depending on the size of your company, you may have multiple employees to track in different divisions or departments. As your business grows or as turnover increases and causes even more confusion, all of that can be a logistical nightmare. It’s easy to avoid payroll compliance mistakes. But our best advice is to proceed with care and caution to ensure everybody gets paid on time and receives what they deserve.
Payments That Are Not On the Official Payroll
All of the money that you pay to your employees must be recorded. That means it all needs to be on the books, also known as the official payroll. Under-the-table payments might be hush-hush arrangements, but they cannot be counted as taxable wages when that happens. Bonuses, commissions, and gifts must be reported as income. Likewise, gift cards and certificates are considered to be the same as cash. Reimbursement expenses will make a difference, though; payroll taxes must be withheld for processing by the IRS.
Not Meeting Paperwork Filing Deadlines
Filing employment paperwork is a crucial part of the onboarding process. The federal government has had a directive in place since 1996 that obligates employers to inform relevant state agencies whenever a new hire comes aboard. Companies have 10-20 business days to complete this task – failing to do so can result in harsh penalties, unnecessary fees, and even audits.
Misclassifying a Worker Could Lead to Penalties
Putting a worker in the wrong category can expose you to punishment. Such an error is easily avoidable as long as you are diligent about your record-keeping. As you are probably aware, workers typically fall into one of four categories: employee, independent contractor, statutory employee, or statutory non-employee. Mishaps are common, and they are heavily frowned upon by the IRS. As a result, committing such errors in regards to tax withholdings or wage reports could subject you to penalties once your tax paperwork is filed and squared away.
Falling Behind on Accurate Employee Records
No matter which industry you belong to, keeping thorough employment records is a necessity. Good record-keeping is essential to your success, even if it doesn’t exhibit a direct impact on your bottom line. Unintentional non-compliance is another trap that can trip up unsuspecting HR managers. As such, be sure to retain these critical records for a window of 4-7 years.
trust the professionals at the Harding group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients.
Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning? We have the necessary expertise and years of proven results to help.
We gladly serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of tax time, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on Facebook, Twitter, YouTube, and LinkedIn.