Payroll is the backbone of your workforce! Unfortunately, it can also be one of the most difficult business operations to manage. In fact, the vast majority of businesses big and small make payroll mistakes. In this article, we’re going to teach you the x most common payroll mistakes and how to avoid them.
1. Missing Deadlines
One of the most common mistakes small business owners make is missing payroll deadlines. It’s important to keep clean records of when you make deposits, your payment calendar, and file on time with state and federal agencies. As you’ll quickly learn, interest can stack fast if you are late on your payments. Ask your payroll rep (or accountant) to set up automatic payments.
2. Not Managing Subcontractors Correctly
If you pay any subcontractors over six hundred dollars in a fiscal year, you need to send them a 1099 form. In fact, most accountants will recommend that you send your contractors who didn’t make $600 over the course of the year 1099. Not only can you actually trigger an audit by not sending these forms, but you can also weaken your relationship with your contractors by failing to send them the tax forms they need. To fix this, make sure you have hired a CPA who will manage this process for you.
3. Not Managing Payroll Taxes Correctly
It is incredibly important that you are withholding taxes properly from your payroll system. You must have a system in place for the city, state, and federal taxes. Moreover, you need to have someone on your team that understands how to manage them properly. Bad management of payroll taxes can hurt you by triggering an audit from the IRS. Worse yet, you can seriously interfere with the personal lives of your employees. Learn more here: Silver Tax Group.
4. Not Keeping Clean Records
If you’re one of those people that hire a family member to do your bookkeeping at the very last minute, you’re one of the many business owners that do not keep clean records. Those messy records will come back to bite you in the form of government penalties. Moreover, keeping back records can put you in a position where you are overpaying or underpaying on your taxes- both of which can be a thorn in your side.
5. Not Having a Backup in Place
What happens if your CPA gets sick and is out for a few weeks? Do you have a plan in place or do you struggle to understand his or her job and get the tasks done yourself? Just like it’s important to find a CPA you can trust to run your finances, it’s important to have a backup that covers their absence. To prevent this, hire an outsourced CPA firm that has a team that can cover their absence.
Proper Planning Will Keep You Ahead
Payroll is hard to manage, no matter what size your business is. Like most accountants and finance professionals can attest to, it’s a monster that can’t be turned off once it has been turned on. The best way to avoid these common payroll mistakes is to plan ahead and hire the right help. Don’t make the mistake of trying to run the payroll on your own is you’re a novice. The mistakes can be costly for your wallet and company morale.