Time is definitely a luxury for small business owners. However, no matter the time constraints, it's important to devote appropriate time to payroll.
In the recent SCORE webinar, "How to Avoid 10 Payroll Mistakes That Cost Businesses Money," Ken Harrington and Michael Trabold of Paychex, Inc. shared 10 payroll mistakes that cost businesses money and gave tips for how to avoid them. “Businesses pay government agencies millions of dollars each year in compliance penalties. In this economy, agencies are more vigilant than ever about enforcing regulation,” said Ken.
Here are 5 of the 10 payroll mistakes to Ken and Michael caution you to avoid :
One of the biggest and easiest errors to make stems from poor organization. While running your own business can be hectic, it’s important to keep meticulous payroll records. Stay on top of payroll changes and keep records of: receipts, tax records, income statements, and employee tips.
Always pay your taxes on time! Tax payment frequency can change depending on the type, size, and location of your business. Stay up-to-date with your tax payments on both the local and state level and remember to keep a record of your payments.
Wrong ID's and Frequency
Take time to review your tax identification number on tax forms and payments. Transposing or inadvertently using the wrong tax ID can easily be avoided. To avoid any delays, be sure to use your assigned ID number for federal, state, and local agencies.
Certain business industries have different rules, laws, tax form, and sometimes tax credits. Restaurants owners for example should be familiar with TEFRA (Tax Equity and Fiscal Responsibility Act of 1982). It insures that tips are reported accurately. The FICA Tip Credit allows owners to possibly recover a portion of payroll taxes paid on tipped employees. Know what legislation is specific to your business industry and familiarize yourself with the application process.
Some fringe benefits may not be taxable while others are taxable under certain/specific circumstances. Refer to guides such as: IRS Publication 15-B Employer’s Tax Guide to Fringe Benefits for more information.
Being a business owner can force you to multitask and challenge you to be involved in every aspect of your business constantly. No matter how seemingly hard the challenge is, it's important to stay organized and well-versed in the rules and regulations of your business industry in order to conserve time and money.
To learn Ken and Michael's other 5 tips, listen to the full webinar here.