Payroll Service Penalties

How do you avoid payroll errors?

Managing payroll can be one of the most time consuming and error-prone challenges facing business owners today. With labor regulations and litigations on the rise, payroll errors can also be costly to the business.

So, what can businesses do to avoid making mistakes on their payroll?

Ensure correct employee data

Payroll mistakes are just that — mistakes. And sometimes they occur because of incorrect employee onboarding information.

This is an easy fix. Create verification processes for both employees and managers to confirm that new staff have correctly entered their name, social security number, bank account deposit number, deductions for benefits), and have accurately filled out their information on their tax forms.

If you have the budget, an employee self-onboarding software can help your new employee complete paperwork electronically before the start date. And thanks to e-signatures, you’re able to ensure the employee has verified the information.

One reminder: Your employees might have life changes during their tenure, so have a process for staff to update their information. Things like changes in an employee’s address, marital status, or tax deductions can all impact payroll so build this into your plan.

Work with a compliance-first mindset

It’s late at night and you’ve had a long week. You just ran payroll and you’re struggling to reconcile taxes, employment regulations, and new requirements. How much advance notice were you supposed to give your employees of scheduling changes again?

Sound familiar?

Staying on top of all the laws can be tough, but it’s critical to eliminate unnecessary payroll mistakes.

Before a new team member starts their first shift, provide an estimate of where, when, and how often they’ll work. When schedules need to change, use compliance tools that automatically record schedule amendments, calculate the required predictability pay, and capture employee consent to the change.

Additionally, don’t forget to check with outside council if you have any questions about the complexities of your local, state, and federal mandates.

Eliminate human error

Common payroll mistakes are just human errors that any business owner can. Maybe you give an employee a bonus gift card and forget to record it on payroll. That well-intentioned award can actually negatively impact your employee if not listed in their pay. Manually processing payroll isn’t just time-consuming.

Think about all those hours spent pulling information from various sources, like your spreadsheets, timesheets, and banking information. Manual payroll can lead to miscalculations, oversights, and even missing key data. Plus, that makes record keeping and organization even harder.

Instead, use your favorite popular payroll software and integrate it into your time tracking software. With just a few clicks, you can run an accurate payroll. As an added bonus, these tools significantly reduce the time spent on managing employee schedules, timesheets, and payroll from hours to minutes per month.

Empower your employees

Preventing payroll mistakes (and potential future litigations) can be as simple as giving your employees the tools and processes needed to communicate with you and your managers about any payroll inaccuracies.

If your employees catch payroll discrepancies, have a formal process in place so they can report these issues and more importantly, you can quickly resolve the discrepancy before they become bigger problems. Use an easy communication tool or payroll discrepancy form where they can notify you or your managers on any timesheet or payroll errors.

Time and attendance tools can also allow your employees to review and verify their hours worked when they clock in and out which provides a layer of attestation protection for the business.

Increase security

As a manager, you’re looking for ways to keep both your staff and your business safe. And security is a big issue when it comes to payroll. Manually payroll leaves your business vulnerable to payroll fraud, like identity theft and misappropriation of funds. Fraudsters from an outside source can also steal employee tax and salary data if the business doesn’t have proper safeguards in place.

Using cloud-based solutions for time tracking integrated with payroll services can mitigate security risks, as these providers have advanced security measures in places such as two-factor authentication, data encryption, and security certifications to ensure your data is properly stored and protected. Additionally, most payroll providers have built-in security features that can alert your business of payroll fraud.

Not Checking Timecards for Mistakes

When employers are in a hurry to process payroll, they might neglect to do one very important thing before running the numbers: check timecards for mistakes. Incorrect timesheets is a very common payroll error and an easy one to avoid. Overpaying employees can, of course, be costly but underpaying employees can be too. According to the DOL, it is the employer’s responsibility to pay employees accurately.

Not Paying Employees for All the Time They Work

Some employers don’t realize that travel time and waiting time are compensable. This can turn into a big problem if employees do this frequently. Compensable means that it must be paid. Even though employees may not be doing their normal job during these times, they are “suffered to work” by their employers and must be paid for the time. Employers can pay employees minimum wage during this type of work time.

Missing deadlines

It is important to mark your payroll calendar and report and deposit and payroll taxes to federal and state agencies on time. Late deposits can result in hefty penalties and interest charges.

How to Fix It: Automating your payroll allows you to never miss a payday and lets you set pau schedules ahead of time so your payroll taxes are always on time so you avoid late payment penalties that add to big bucks and strain your already heavy workload.

Miscalculating overtime pay

Specific guidelines must be followed when determining overtime pay and miscalculations can be costly. Employee litigation has been a rising trend in recent years where workers have claimed to be misclassified and treated as “exempt” employees and therefore not entitled to overtime.

How to Fix It: When tracking work hours through our time and attendance platform all hours (including overtime) are recorded and collected on organized timesheets that make calculating hours simple. Our integrated, All-in-One platform unifies time tracking and payroll so everything is connected and nothing is ever missed.

Poor record keeping & data entry

Mismatched names and social security numbers are so common that the Social Security Administration set up a special telephone # to verify them. Every year, sloppy record-keeping and data entry mistakes, cost companies millions of dollars in both overpayments and government penalties.

How to Fix It: The Fingercheck self-onboarding features let new hires enter their personal information, so you don’t have any data entry whatsoever). This ensures employee data to be accurate. you simply enter all important records and data such as SSN# one time and save them securely on the cloud for easy, anytime access. Furthermore, our software is integrated with our Time & Attendance platform for all work hour records that are neatly organized and always accurate. Now that’s an All-in-One solution!

How Much Do Payroll Errors Cost A Small Business

Entrepreneur.com reports that payroll mistakes can cost approximately $4 to $9 each pay period. This does not include the amount of money that you may be overpaying your employees. Let’s say that you have an employee that make $15/hr and this employee is somehow gaining an additional hour of pay each week. With 52 weeks in a year, this increases that one employee’s salary by $780 per year. Keep in mind that this is only for one employee… this could be happening for all of your employees. You are basically giving away this money for free.

Then you have the trickle down effect. Your small business plans, schedules, purchases, hires, and has other investments that are set to a specific budget. If you are dipping into your payroll budget then guess what, you start to dip into other budgets as well. Everything will have to decrease in order for you to makeup for the payroll errors that are taking place. This could have been going on for years and you just don’t know it yet.

Four End Of Year Tax Planning Strategies

What Is a Tax Advisor and How Do You Choose One?

A tax advisor, also known as an enrolled tax agent or certified public accountant, is an accounting professional who specializes in the complex U.S. tax code, and who uses that knowledge to help taxpayers minimize their tax burden to Uncle Sam

Enrolled agents: Specially trained enrolled tax agents must pass a rigorous test and meet annual industry regulatory requirements to meet and sustain their professional credentials. Enrolled agents are licensed by the federal government, and are fully approved to represent clients before the I.R.S. They also provide general consumer and business tax services like preparing income taxes and offering specialized tax planning advice.

Certified public accounts (CPA): A certified public accountant shares many of the same attributes as an enrolled agent, but with a key distinction. While enrolled agents are licensed by the federal government, a CPA is licensed by the state where they set up shop, and must complete 150 hours of undergraduate and/or graduate school study and clear a CPA test given by the American Institute of CPA’s.

Professionally credentialed tax advisors can work in a variety of business models. Some run their own offices, some work for large corporations and tax-preparation chains, and some branch out to become certified financial planners. Most tax advisors who work with the general public charge by completed tax return, or on a service-by-service basis (like after handling an estate case or helping a customer start a small business.)

How to Find a Tax Advisor

No matter which type of tax advisor you choose, finding one isn’t difficult. You can either opt for word-of-mouth (asking co-workers, neighbors, family and friends for recommendations) or through industry trade groups.

Need someone to prepare your tax return?

There are various types of tax return preparers, including certified public accountants, enrolled agents, attorneys, and many others who don’t have a professional credential. You expect your preparer to be skilled in tax preparation and to accurately file your income tax return. You trust him or her with your most personal information. They know about your marriage, your income, your children and your social security numbers – the details of your financial life.

What kind of tax preparer do I need?

Anyone can be a paid tax return preparer as long as they have an IRS Preparer Tax Identification Number (PTIN). However, tax return preparers have differing levels of skills, education and expertise

How can I check a tax preparer’s credentials?

Our Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help you find preparers in your area who currently hold professional credentials recognized by the IRS, or who hold an Annual Filing Season Program Record of Completion. You can also check the professional organizations many tax preparers belong to.

What if I have a complaint about a tax preparer?

Tax return preparer fraud is among the list of common tax scams. The IRS provides tips on avoiding unscrupulous tax preparers  and is committed to investigating paid tax return preparers who act improperly.

Tax Planning for Beginners

Your tax refund is based on how much tax you pay in excess of the tax you owe. Basic tax planning strategies aimed at reducing the amount of your taxable income may increase the gap and thus your refund. In some cases, these strategies benefit you in other ways, offsetting future costs for health care or providing for retirement. Though some aspects of tax law can be complicated, even a beginner can focus on taxable income reduction

Planning your deduction method

When completing your tax return, you have a choice between standard or itemized tax deduction methods to determine taxable income. The standard deduction is a dollar amount set by the government that you can claim without accounting for the expenses that typically make up a taxpayer’s allowed deductions. Itemized deductions are actual expenditure you make for deductible expenses. Your actual deductible expenditures in a tax year may amount to more than the standard deduction amount. If that’s the case, you’ll likely pay less tax or get a larger refund using the itemized deduction method. However, the itemized method requires support in the form of receipts and other documents to demonstrate these amounts were actually spent. Consider a filing system to save receipts. Even if you choose to claim the standard deduction, having receipts on file will help you make an informed choice at tax time.

Retirement savings strategies

“Savings plans such as qualified individual retirement arrangements save you tax in the current year, investment earnings grow tax-free year to year, and provide income for retirement, when you may be taxed in a lower bracket,” says James Windsor, certified public accountant from Ann Arbor, Mich. Many taxpayers turn to retirement plans for both the tax reductions now and income later. With a tax rate of 25 percent, for example, contributing $15,000 to a retirement plan may save you $3,750 on your current tax return. Investment earnings on money in your account are not taxed until withdrawal. Maximizing your annual contributions to retirement accounts may be an effective cornerstone for your basic tax planning strategy.

Other tax-sheltered savings

While the size of allowable contributions to retirement plans is attractive to many taxpayers, there are other savings plans that also defer tax and, in some cases, help you avoid tax altogether.

Using tax credits

Another way to reduce the tax you owe is to use tax credits that apply to your situation. Refundable tax credits not only reduce your tax but can be used to create a surplus, resulting in a refund

mistakes to avoid when choosing a financial or tax adviser

If you have the knowledge to do your own financial planning, tax preparation and/or investing, you can choose whether or not to do it yourself. Part of that decision is determining the highest and best use of your time. Doing the job of a financial or tax adviser, at least doing it well, requires a significant commitment of time and energy, both of which are limited and precious. Most people would rather spend that time on family, travel, hobbies, or volunteer work. If you’re in that camp, and need to find a financial or tax adviser, here are some common mistakes people make—and how to avoid them.

Not making a decision

Indecision—i.e., choosing not to make a decision—is like selecting “none of the above” on a test question, and can often be an impediment to financial success. This is as true when choosing an adviser as it is to sound investing. Many people let too much money sit in cash, or fail to rebalance their investment portfolios periodically, because they are waiting for the “right” time to make a change. Indeed, an inability to act (due to procrastination or indecision) is one reason many people choose to hire a professional financial adviser, who can eliminate the emotional element and use a disciplined approach to make decisions and take action as needed.

A professional financial adviser or planner will actually help guide you through the decision-making process, assisting you in determining the approach and allocation that best suits your needs, circumstances and goals. Once you agree together on risk and strategy constraints, you can choose whether or not to delegate day-to-day purchase and sale decisions to that adviser (or firm) by giving them “discretionary” authority. Either way, they should help you quantify your needs, decide on a plan of action…and set it in motion.

Not asking for referrals

If you are serious about hiring a financial professional, ask for recommendations from people you respect, such as work colleagues, friends, and professionals in related industries (e.g., an estate-planning attorney or insurance agent). If the idea of asking for a referral makes you uncomfortable, here are some questions to help you get the information you need

Assuming what a title or credential means

While no one can call themselves a “CPA” without considerable education and testing, literally anyone licensed to sell financial products (insurance, mutual funds, etc.) can call themselves a “financial adviser” or “wealth manager.” Similarly, certain credentials can be obtained by simply spending a few hours or a weekend taking a course, whereas others, including “CPA” (Certified Public Accountant) and “CFP” (Certified Financial Planner practitioner), require many months or even years of study, rigorous testing, and ongoing continuing education.

What Is a Tax Advisor? Attributes to Look For

Since Betterment isn’t a tax advisor, we often suggest that customers see a tax advisor regarding certain issues or decisions. Who exactly is a tax advisor and how should you think about picking one?

Anyone with an IRS Prepare Tax Identification number can be legally paid to file tax returns on behalf of others. But merely having this number doesn’t tell you much about the tax preparer; tax preparers have different experience, skills, and expertise.

Tax season is now upon us. Now that you’ve probably received all of your tax forms, you may be facing a choice for how to proceed with filing: do it yourself with tax software or hire a professional tax advisor?

Although it certainly will be more expensive than using tax software, hiring a tax advisor makes sense for certain individuals, depending on their financial circumstances

Here are two important factors to consider when deciding if a tax advisor is right for you:

Time: Even with tax software guiding you, filing your taxes yourself can be time consuming. You’ll need to make sure that you’ve entered or imported the data from your tax forms correctly, which often takes at least several hours. We’ve written before about valuing your time here.

Complexity: The more complicated your financial situation, the more a tax advisor may be able to help you. Have partnership income, or income from an S corporation? Been subject to alternative minimum tax in past years? Received or exercised stock options this year? Tax software can handle these issues, but it will take time, and the risk of mistakes (and even an audit) increases.