A problematic aspect of payroll management is payroll compliance. Legislation and regulations change in the government each year, and so does the possibility of making errors that can result in penalizations.
Not the following compliance can involve fines, fees, and government penalties. The time required into going back and re-doing paperwork, filling out additional forms, and correcting existing errors from the results of mistakes can be costly.
Here are three errors that are commonly made in payroll management compliance practices:
Failing to File Appropriate Forms on Time
Employers are required to report information on all new hires within 10 to 20 business days. There are also quarterly and Year-End deadlines that need to be met to avoid penalties, fees, and possible audits. Not following deadlines and filing forms late can result in penalties for your business.
Assigning the Wrong Classifications
There are different classifications for workers, such as employees, independent contractors, a statutory employee, or a statutory non-employee. You need to classify a worker appropriately to determine a worker’s status for tax purposes. Failing to withhold taxes or report wages is non-compliant and can result in fines and penalties after you file your taxes.
Failing to Keep and Maintain Employee Records
This is an area that can result in unintentional non-compliance. Employee payroll records can be stored for three years after the last day of entry. The IRS requires employee records to be held for four years after employees leave a job. Each state adheres to specific laws that are governed by unemployment agencies that need businesses to retain employment records for four to seven years.
How to Get Help from a PEO Company
There is a way to keep your payroll management compliant, and this includes outsourcing your payroll needs to a PEO company, also known as a professional employer organization. You can partner with a PEO service for your payroll needs and avoid wasting time, mistakes, and costly penalties.
Outsourcing your payroll to a PEO service is more cost-effective than hiring a dedicated HR person for your business. PEO companies employ experts with the skill and knowledge to oversee your payroll and are up to date on laws and regulations, so you don’t have to worry about incurring tax penalties or fines.
Here are three ways a PEO company can keep your payroll compliant:
#1. Payroll Rules and Regulations
Rules and regulations continuously change in regards to employee payrolls. The HR specialists with a PEO company are up to date with legislation and can ensure that your payroll is compliant.
#2. Miscalculating Payroll
A complex aspect of a payroll manager’s job is calculating appropriate payroll taxes. Take-home pay and gross pay for employees need to be computed appropriately to avoid paying unnecessary fees to tax agencies.
#3. Garnishment Request
Missing garnishment requests can make your business non-compliant. When a PEO is efficiently taking care of your PEO company, any garnishment requests will be put into an employee’s folder and added to a calendar to ensure that compliance is being followed and deductions are being made for each payment.
Many small businesses find themselves making mistakes in payroll, which leads to expensive tax penalties each year. If you want to avoid making errors with pay, then consider partnering with a PEO. Learn how PEO companies that can help with payroll on this article from Retire At 21.