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Costly Payroll Errors You Can — and Should — Avoid
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Payroll is a complicated business. On top of paying wages to your salaried and hourly employees, you must keep all their deductions and taxes straight, and then submit the proper forms and funds to the correct government agencies. A typo here and an incorrect date there can cause an enormous, and possibly expensive, hassle.
One way to minimize these errors is to automate your company’s payroll process. Another option is payroll outsourcing. I’ve been reading a lot about payroll processing and payroll tax errors this week. Here are some articles and blog posts I’ve found helpful. I think you’ll find them useful, too.
IRS Threatens New Orleans City Workers After Payroll Data Flub. NOLA.com: “Some New Orleans city workers have been getting letters from the IRS alleging they owe back taxes from 2013, even though they paid what they owed. The letters are the result of bad payroll data that City Hall sent to the federal government, according to an email that the city’s comptroller, Roy Guercio, sent to employees this month. City Hall mistakenly sent the Social Security Administration 15 months of earnings instead of 12, according to the email. Employees received accurate W-2 forms, or at least ones that did not include an extra three months of income, and paid their taxes accordingly — leading the Internal Revenue Service to conclude they fudged their returns.”
Payroll Fiascos that Hit the Headlines. CoreHR: “Imagine standing in line on the busiest shopping day of Christmas to buy that special toy your child always wanted. You’re in luck and there are still some left when you get to the top of the queue. You swipe your credit card.… and it’s declined. The shop assistant swipes it again. No dice. You’re out of funds. How can this happen? You’ve just been paid! It did actually happen to workers in Luzerne County, Pennsylvania, when their payroll was processed late. The problem was attributed to ‘human error’ due to the person who was supposed to authorise payments being absent on vacation.”
Never Mess With an Employee’s Paycheck – Friday Distraction. HR Bartender: “Organizations need to create payroll processes that have checks and balances in place so, hopefully, mistakes are caught before they happen. But the other piece of the process needs to be having a responsive way of dealing with errors when they do occur. We’re human; mistakes will happen. Part of the perfection is correcting payroll errors quickly.”
How to Avoid 5 Common Payroll Tax Problems. W. Cotton Mather, CPA: “The IRS is not very patient with employers who make errors on their payroll tax forms. Simple math and calculation mistakes, which could be rectified relatively easily in other sectors, won’t fly with the government. If an error results in the underpayment of any payroll taxes, the IRS will consider it simply a late payment and will assess the usual interest and penalties. It’s imperative that business owners triple-check every calculation they make in the area of payroll tax. Accuracy definitely pays off in the long run.”
Why and When to Outsource Payroll Services. Headway in Research: “…without the proper knowledge of payroll procedure and access to a sound payroll program, it’s easy to make mistakes. Employees as well as federal, state, and local tax collection agencies need to be paid in full, on time, and in the proper manner. Usually, late payments are cause for monetary penalties. Finally, using a payroll service can ease your mind. The Internal Revenue Service has reported that one out of every three employers has been charged for a payroll mistake, with total penalties reaching into the billions of dollars. And given the ever-changing nature of tax regulations, it’s easy to make an error that can grossly affect your bottom line.”
Need help processing payroll and payroll taxes for your organization? Contact us. Our team of experts is happy to help!
HR Solutions is a human resources outsourcing firm based in Baton Rouge, Louisiana. We eliminate human resources headaches for businesses with 10 to 1,000 employees by handling their payroll, employee benefits, regulatory compliance and other staffing needs. Contact us to learn how we can streamline your company’s human resources function to save money and reduce risk.
