MM Accounting and CFO Solutions provides bookkeeping and payroll services to businesses and individuals throughout New York City and the five boroughs. Check out these Top Ten Payroll Mistakes that are often made today by businesses in their bookkeeping. Avoid mistakes and get your payroll done right by working with Margo.
1. Employee Misclassification Causes Serious Problems
Especially for businesses that work within the real estate industry, classifying employees and subcontractors can be difficult. Misclassification can create extra unnecessary costs for your business. If you avoid classifying a worker as an employee and instead as an independent contractor you will avoid certain taxes and costs such as paying Social Security, Workers’ Compensation and State Unemployment Insurance, for example. However, if you classify the worker incorrectly as an independent contractor at the end of the year you can be held responsible for the accumulated costs associated with that misclassified worker’s employment taxes.
So how do you know if your worker should be classified as an employee or as an independent contactor? Consider these simple questions as a guideline, but not as a definitive rule: Do they control their own hours and work? Are they in control of how their work is done? Do they provide all of their own equipment and tools? If you can answer “yes” to all of these questions it is likely that you can classify them as independent contractors and avoid certain associated costs.
2. Errors in Filling Out W2s
Employers often make mistakes when filling out their employee’s W2s, whether due to filling in the wrong boxes or miswriting the Social Security Number. One tip: when filling out W2s don’t use dollar signs. The electronic scanners that the government uses can often misread the dollar signs as 8’s.
3. Missing Tax Deposit and Filing Deadlines
Payroll is a lot of work. For small businesses that focus on other means of work each and every day the paperwork and details of payroll can often fall by the way side. This is understandable but not acceptable to the state or federal offices, which will place severe penalties for missing deadlines for depositing payroll taxes and filing the required reports.
4. Poor Record-Keeping and Data-Gathering
Payroll errors can result in under or overpayments, misapplication of funds, and inaccurate calculation of employee’s work hours. All of these errors and more can result in penalties, fines, due interest, jail time, and unnecessary loss of revenue. Your business can avoid this by outsourcing your bookkeeping and ensuring that it is done right.
5. Miscalculating State and Unemployment Tax
The State Unemployment Tax is an employer-paid state-run program in New York. This means that your business is responsible to pay for your employee’s benefits. Understanding the rules and regulations can be very difficult but if you miscalculate the rate for your company you can owe even more in fines and interest. Working with one of our Manhattan bookkeepers can help you navigate these laws.
6. Mishandling Levies, Child Support, or Garnishments
While processing payroll you may be responsible to pay a third party if your employee owes money, such as child support. If a judgment is made against your employee that will have their wages will be garnished, your business is responsible for withholding a certain amount of their pay and sending the check to the third party directly. MM Accounting and CFO Solutions can also provide financial auditing services for child support and divorce cases.
9. Not Displaying Wage Posters
It is a federal requirement to display wage posters. If your office is found to be lacking these minimum wage posters you can be convicted and sentenced to 6 months in prison and/or owe a $10,000 fine. Margo provides all its clients with proper rules and regulations to make their accounting and bookkeeping process as easy as possible.
7. Incorrectly Filling Out 1099s
Just like W2s, 1099s are important wage documents that are used to collect information for the federal government and state. Mistakes are often made on this form for independent contractors. It can be especially difficult for a business that deals with many independent contractors or subs out work, such as for real estate companies. Make sure your business does not make them!
8. Breaches In Confidentiality
It is important to keep your employees satisfied and well taken care of. In order to do that privacy rights must be upheld. You should respect your employees by protecting their financial information and keeping their salary private from the public and other employees.
10. Ignorant Mistakes
Avoid Mistakes & Get Your Payroll Done Right
Looking to avoid costly and embarrassing mistakes with your payroll? Is your business located in New York City? Let Margo help you do just that. We provide our customers with immaculate service and attention to detail. Why not begin the process of bettering your business by experiencing our free payroll analysis.