When your business grows enough to sustain a small workforce, you have cause to celebrate. You took a great idea or promising concept, made it resonate with consumers, and now you’re doing well enough to hire employees. Congratulations!
To help you remain firmly on the path to success and profitability, we have listed the four most common mistakes that small business owners make with payroll, and show you how to avoid them.
Not Remitting Payroll Taxes
This is arguably one of the most expensive mistakes you can make with your company payroll. An estimated 40% of small businesses in the U.S. are fined an average of $850 every year for payroll tax errors, the most common of which are missed or late payments. Hiring an accountant or dedicated payroll provider will ensure that you pay all applicable federal, state, and local taxes and remit them on time.
Failing to Distinguish Between Employees and Contractors
Another common mistake is paying a contractor the way an employee should be paid, and vice-versa. The Internal Revenue Service uses a particular set of rules to determine if your workers are employees or contractors, and this affects the way they must be paid. If you classify someone in the wrong category, compliance issues from the IRS will result, and legal trouble may even occur. Advice from a labor and employment attorney can help you determine the correct way to classify your workforce.
Failing to Run Payroll on Time
Small business owners who manage their own company payroll have been known to overpay or underpay their staff due to calculation errors. During especially busy times, they can even forget to process payroll altogether, with predictable results. Working with an accountant or reputable payroll provider will take that responsibility out of your hands and leave you free to concentrate on growing the company.
Forgetting to Record Checks
This is another mistake that happens when a busy owner is also responsible for their own payroll. Pressed for time, they give their employees a paper check for a bonus or payroll advance and forget to record that check in the system. Even a simple error like this can throw your records off-kilter and result in erroneous tax deposits. This is another situation that can be avoided by working with payroll professionals.
These are the more common mistakes, but there are others that can throw your books into disarray, such as not saving your payroll records and even setting up the payroll system incorrectly at the beginning. Whatever the mistake, it can get your business—and you—in trouble with the IRS.
If you require assistance in resolving a payroll-related problem or concern at your New York or Florida business, contact the business law team at Rosen Law today. We will help you correct the issue and give you the advice needed to avoid future ones, so that IRS problems do not impact the future of your growing business.