With user-friendly payroll programs, such as QuickBooks, it can be easy to feel confident in your payroll accuracy. Although the software has come a long way, it is vital as a business owner to remember that the program is only as good as the information you put into it. You probably won’t be getting a reminder call from the QuickBooks headquarters to let you know it’s time to send those 1099 forms, which is unfortunate because those fines range from $50-$280 per 1099. Those who do utilize QuickBooks, or other similar programs, will find a plethora of videos & articles online to help keep your business on the right track. For example, a quick google search landed me this nifty article: https://www.inc.com
But that’s not why you’re here. Let’s go over the most common (in our opinion) costly payroll mishaps.
This one is often overlooked and yet, potentially the most expensive mistake. Not properly handling garnishments, levies, or child support. Your employees depend on you to maintain these transactions. If you fail to do so, your employee may find a new employer that they can depend on. As any seasoned business owner knows, employee turnover is more than just a headache, it’s a high-priced reality of owning a business. Although not heard of often, if you’re not withholding child support as required, you may find yourself in contempt of court. We won’t get into the tax liability you will incur for not responding to employee levies, but let’s just say, it’s not something you want to miss.
Don’t be late! Penalties are 15% of taxes due for deposits still unpaid more than 10 days after the date of the first notice Depositing employment taxes late. For the State of Montana you’re looking at a $50 minimum, or. 5% of the outstanding tax per month. Up to a maximum of 25% of the tax due (might want to keep this bookmarked: https://mtrevenue.gov/taxes/penalty-and-interest).
As a business owner, you can expect to be audited at some point. Having disorganized, inaccurate, or inadequate records may result in significant penalties. Both federal and state agencies can charge interest on those penalties, which is a major cause of businesses going under. If you ignore the IRS, they won’t forget about the audit. It’s worth reading up on:
https://www.hrblock.com/tax-center/irs/ignore-audit-will-go-away-right/
https://k2radio.com/irs-delays
Time is of the essence! Miscalculating or failing to pay overtime is easy to do, and a pain to fix. Guidelines must be followed when managing overtime pay. Basic miscalculations can be costly…100% of overtime pay owed, civil penalties of up to $1,000 per violation, and any additional state penalties. Over recent years, litigation has been increasing claiming that employees who were treated as “exempt” employees and therefore not entitled to overtime were misclassified. A simple tip, make sure you are calculating overtime weekly, instead of every 2 weeks. The Montana Department of Labor and Industry has a great reference guide available here: https://erd.dli.mt.gov/labor
Does your contractor have a time-card? Does he/she wear your company logo? If they do, they are not a contractor, they are your employee! Mis-classifying employees and contractors is a major blunder to make. Here’s why: The penalty for classifying an employee as an independent contractor: 1.5% of all wages paid to the employee, $50 fine for failure to file Form W-2, 40% of employee FICA taxes, and 100% of employer FICA taxes. Penalty if the misclassification is determined to be intentional: Up to 20% of all wages paid to the employee, 100% of employee and employer FICA taxes, and criminal penalties of up to $1,000 and/or one year in PRISON.
The penalty for classifying a non-exempt employee as exempt: 100% of unpaid overtime owed to the employee dating back three years from the employee claim. I’ll leave you with this: https://www.irs.gov/newsroom
Payroll doesn’t need to be stressful. Stay informed, and when in doubt, call https://aps-peo.com/
