6 Mistake You Don’t Want to Make When Managing Your Payroll
Payroll calculation and distribution are complicated by nature. It’s important to make sure that all the little details are correct, but often this results in basic (but major) points being overlooked! Here are a couple of the things you’ll need to remember when handling your company’s payroll.
Keep Your Records!
The Fair Labor Standards Act holds employers to many different standards, one of which is keeping three years of payroll records on-file at all times. Most experts recommend keeping up to seven years of records on file, but even three years’ worth of records can be challenging to manage and maintain for many small businesses. Fortunately, most small business payroll software will store this data for you, which will be invaluable should you be audited by the IRS.
Make Sure All “Employees” Are Employees
There are many different types of workers for irs wage garnishment help you may hire, such as part-time employees, full-time employees, leased employees, or contractors. When it comes to your payroll, it’s important to determine if these workers are legal “employees”. If you pay an employee as a contractor, you may end up responsible for paying them legally required overtime. Also, you will have to pay any owed taxes (for both you and the employee) and might get fined for the miscalculation. A worker is considered an employee if:
- You control their hours and tasks.
- You pay them a salary or provide a paycheck regularly.
- You haven’t set a specified time of employment.
These are just general guidelines; the specifics may vary slightly by the situation, so we highly recommend checking out this page if you are unsure of a worker’s classification.
Determine if an employee is exempt.
You don’t want to accidentally miscalculate a non-exempt employee as an exempt employee. If you do, you will owe them back payments for all overtime worked. Non-exempt workers are entitled to overtime pay, which generally applies to any hours worked beyond 40 hours per week. However, exempt workers don’t qualify for overtime pay, so you simply need to pay them their salary. An employee must meet these three requirements to be qualified as “exempt”:
- Their job duties directly affect the company
- You pay them a salary
- They make over $35,568 per year, or $684 every week
Ensure your tax calculations are correct.
If your calculations are incorrect, you may end up owing back taxes, along with fines and possible interest. While these costly mistakes are easy to make if you’re manually processing your payroll, you can effectively prevent these errors by using payroll software for small businesses.
Pay your employees on time.
One of the easiest ways to get on your employees’ bad side is by paying them late (or underpaying them). Unlike manual payroll processing, which is time-consuming and may be challenging to complete on time, complete payroll solutions will handle all the calculations for you and can even distribute the necessary funds on your behalf!
Distribute tax forms by the due date.
Tax forms are due (both to your employees and the IRS) every year. Not sending these forms out on time may result in your company being hit with large fines, which immediately cuts into your budget for the new year. If you don’t use payroll software then you will have to keep track of all the due dates and make sure to send the forms on time.
However, payroll solutions such as UZIO will keep track of these due dates and send out the forms for you, avoiding any potential penalties or fees. Therefore, it’s best to reduce your risk of unexpected expenses by using a payroll platform rather than trying to calculate, complete, and distribute all the paperwork yourself.
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