How to Prevent Payroll Mistakes & Reduce Errors

Payroll is an essential aspect of operating a business, whether it is a small local business, regional, national, or international company. No matter the size of the company, it’s easy to make errors, after all the IRS stated that at least 40% of small and mid-sized business face penalties due to incorrect payroll filing, which led to over 5 million employers paying $7 billion in civil penalties in 2017. To avoid becoming part of that group, here are some ways to reduce errors and prevent payroll mistakes.

 

Account For Vacations and Holiday Pay

If your business offers paid vacation and holiday time, even though there aren’t any states that require companies to do this, don’t forget to keep track of how much time off someone saved up, how many vacation days people have and when they used those vacation days.

 

Automate The Payroll System

With a manual payroll system, it’s easy to end up with a lot of mistakes. The person in charge might type in the wrong number on a calculator, forget a step, or forget to include something in the process. When you automate your payroll system, it drastically reduces the number of potential errors, and saves you time as it automatically calculates taxes and payments.

 

Budget for Tax Payments

One thing that’s easy to forget is that you also have to pay payroll taxes, which can come from the local, state, and federal levels. Your business might not have to pay every tax, but you need to know which ones you have to pay; otherwise, you’ll have to pay fines for not filing. You also need to ensure that you correctly classify employees and contractors to avoid other penalties. Remember that payroll tax laws can change in a blink of an eye, so it’s often easier to leave that in the hands of a professional. At Taurus CPA Solutions, we offer custom-tailored tax solutions that fit you and your company.

 

Have Good Data Security

The last thing you want is someone hacking into your payroll and having their way with your records. Whether you use software or a cloud-based system, you should have it tested thoroughly to ensure good security. With Taurus CPA Solutions, we help you choose the right solution that will suit your business needs now and in the future.

 

Verify Employee Data

Keeping good records means that you have to verify employee data from time to time. A simple error can lead to misclassifications, a delay in pay, improper tax filing, and more. You should also keep payroll records of past employees for seven years after they leave. The IRS has a rule requiring that you keep the records for four years, but it’s a good idea to keep them for longer, just in case.

 

Preventing payroll mistakes is one of the keys to successful business continuation and organization. If your payroll is out of sorts, it causes many problems, some of them indirectly related. If you need assistance with your payroll taxes or need one of our other services, then reach out to us by filling out our online form, emailing us at info@tauruscpas.com, or calling us at 410-465-4600.