Running a business efficiently requires attention to detail, and it’s easy to make mistakes if one isn’t paying attention or staying organized. What may seem like a simple transaction — paying workers — is actually a complex process with a lot of different components. But this is an area you really don’t want to mess up, as it can adversely affect you, your business, and your employees. It can even have legal repercussions. Be aware in advance of the common payroll mistakes and how to avoid them. LTD Global offers the following guidance to help you stay on track.
Don’t miss your deadlines.
Missing deadlines is a common mistake, but one that can lead to an erosion of trust, a negative work environment, and hefty tax penalties. It’s essential that you set a clear schedule so you aren’t scrambling to meet a deadline at the last minute — or even failing to meet it completely. Using an online scheduling app or automating your payroll can help you remember to submit your state and federal payroll taxes before the deadline. Stay ahead and keep on target with payroll and other taxation concerns by always doing end-of-year tax planning. And of course, always be sure to pay employees and contractors on time!
Keep your pay records accurate and up to date.
Proper and thorough record-keeping is necessary for every aspect of running a business, but most especially when it comes to taxes. You should enter data immediately, in order not to forget, and always double-check to make sure your information is accurate. Be sure your employees are also entering their information correctly. You don’t want to mix up Social Security numbers or enter incorrect amounts just because someone was distracted or in a hurry. And be aware: If your records are regularly inaccurate, this could bring on an audit. It’s a good idea to use payroll software that will run reports for you prior to submission.
Understand employee and contractor classification.
If you hired consultants, independent contractors, or temporary workers in the last year, you need to classify them correctly and send them 1099s by the deadline. The IRS recently adjusted the previous 1099-MISC designation to 1099-NEC. The latter is now used to report independent contractor pay, and while the former is still in use, it is only to record miscellaneous income, such as rents or awards. Be clear on what qualifies as non-employee compensation so you know when to send a 1099-NEC. Business owners should also consider submitting electronically; online 1099 filing makes the process far easier and considerably more accurate.
Keep track of different kinds of pay.
If paying workers were just a matter of compensating them a set wage for hours worked, maintaining payroll would still be complicated enough. But you also need to calculate overtime, deductions, personal time, sick time, compensation for training, and more. And don’t forget to stay on top of any additional issues that may affect payroll, such as garnish requests.
How to avoid these errors?
Planning well in advance, staying organized, and keeping up with rules and regulations are essential for business owners to be successful in every area of their business, including payroll. If you feel overwhelmed by the prospect of adding yet another obligation to your seemingly ever-expanding list of duties as a business owner, connect with LTD Global for cloud solutions that can support your accounting, HR, and administrative needs. Call (925) 598-0056 or submit this form.