How to Prevent Payroll Mistakes

How to Prevent Payroll Mistakes

How to Prevent Payroll MistakesPrevent Payroll Mistakes – Payroll is part of every business, big or small. Wages, bonuses and withheld taxes plays a major role in the net income of companies and are subject to laws and regulations so preventing payroll mistakes can lead to more profitability.

For small businesses, payroll is even more crucial since you can be putting your company at a risk on noncompliance if you’re not fully versed in how it works. Continue reading to see how you can prevent payroll mistakes.

Latest regulations

If you’re not up to date with the newest payroll laws, you can over-withhold federal income tax, underpay employees or state unemployment taxes and so on. In just the past few years, there were about ten federal regulations changed with reference to payroll. For example, do you know about the Working Families Tax Relief Act of 2004. This act includes middle class and marriage penalty relief, a number of extended tax breaks for businesses, code simplifications through a qualifying child and many technical corrections.

The Bankruptcy Abuse and Prevention and Consumer Protection Act of 2006 also had some changes as well as many more. If you’re making payroll mistakes, you may be incorrectly calculating fringe benefits when reporting your employees’ income. Your bookkeeping department can help you sort these out.

Wage garnishments

Wage GarnishmentsWage garnishments refers to when a court issues and order requiring you, the employer, to withhold a specific amount of your employees’ paycheck and send directly to someone or an institution to whom they owe money until the debt is paid in full. Wage garnishments include levies and child support and they can be hard to implement, each with their own specific rules.

For example, for ordinary garnishments, (those not surrounding bankruptcy or state/federal tax) the weekly amount may not exceed the lesser of two figures: 25% of an employee’s disposable earnings OR the amount by which their earnings are greater than 30 times the federal minimum. As employer, it’s crucial you know the regulations surrounding wage garnishments since you have to remit the deductions correctly.

Employee Fringe benefits

These are extra benefits that supplement your employees’ income, such as a company car, subsidized meals, health insurance, life insurance, gift cards, holiday gift certificates, door prizes at company events and more. Employee fringe benefits are generally play a role in payroll mistakes, but these perks are also a competitive benefit that employers use to attract talented people. In fact, a 2015 study found that 25.2% of job seekers say fringe benefits are very important to them.

Some companies are taking these perks to the extreme offering a lot more than just gift cards. For example, concierge services that allow employees to have their chores done. Some give out free tuition, while big enterprises such as Google and Apple offer egg-freezing coverage for those interested. As a business owner, it’s crucial you don’t fail to report your fringe benefits so as to not be subject to significant penalties. For help on how to file those perks, contact your bookkeeping department.

Third-party sick pay

Some businesses have a third-part insurance company taking over the salary payments for those on long-term disability. But payroll mistakes tend to be made when employers forget they are the ones still responsible for their employees’ share of social security, Medicare and federal unemployment tax. They also have to report federal income tax withheld and deposited by the third party.

Nonexempt workforce

Nonexempt workforceNonexempt employees have to be paid overtime when they work for more than the traditional 40 hours a week. If their incorrectly classified, wage and hour audits, penalties and lawsuits are a possibility. Make sure your fully understand the rules of nonexempt employees.

Prevent payroll mistakes by hiring professional bookkeeping firm such as your bookkeeping department. Call 305.868.7620 for more details.

 

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