Avoid the Biggest Payroll Compliance Risks
There is more to paying your employees than simply issuing checks on time. Myriad federal laws and regulations govern payroll, and when it comes to withholding and other specifics, the rules may vary from state to state.
Accountants usually see two distinct concerns when it comes to handling payroll properly. Some companies think they are doing everything right when, in fact, they are not. And then there are the CEOs and finance executives who readily admit that they don’t know if their payroll and reporting are correct in every detail. It can be worrisome, but it doesn’t need to be.
What are Common Payroll Issues When it Comes to Compliance?
- Missed or inaccurate tax payments could result in costly penalties and/or interest.
- Staff time can be wasted tracking down and dealing with mistakes.
- Employee morale can drop if there are ongoing issues with incorrect paychecks.
- State tax agencies can assess penalties for incorrect or late reporting.
- State labor commissions can question your handling of overtime payments, fringe benefit payments, termination payment timing, minimum wage compliance, or misclassification of exempt or contract employees.
Clearly, you want to avoid these common payroll compliance risks. Ask yourself if any of the below red flags sound familiar. If so, it might be time to get professional help to protect your company and regain your confidence.
- Are you retaining all the payroll forms you are required to collect and save?
- Do you have accurate and complete payroll records to back up and support whatever you’re doing?
- Do you understand the potential payroll implications that lurk within complex legislation such as the Family and Medical Leave Act, Americans with Disabilities Act, Fair Labor Standards Act, and Affordable Care Act?
- Are you complying with all payroll tax and labor laws?
- If you’re running payroll in-house, have you received notices from tax agencies stating you owe money or, at the very least, need to pay penalties because you didn’t file or pay on time?
- Are you certain you are deducting the right taxes in the right amounts? Or are you doing everything you can to ensure the data you provide to your outside payroll provider is complete and accurate?
- And on a positive note, are you taking all available tax credits that run through payroll? Many of these are going away as the impact of COVID-19 lessens, but some opportunities still remain.
Get Help, and Get it Right
Any of the issues noted above are signs that you need help with your payroll. You can likely solve these problems with outsourced payroll processing—but you’ll get the best results and greatest peace of mind if you choose the right payroll partner. For example, a knowledgeable advisor can ensure thoroughness and accuracy of payroll on your behalf or can serve as an expert liaison between your team and your payroll provider if you’re using a third party.
Relying on your CPA firm eliminates worry. You can avoid costly repercussions of mistakes, better leverage your payroll system, and improve your relationship with your payroll provider, if you have one. And while outside experts take care of payroll details, you and your personnel can stay focused on core work to build your business.
Melissa Doumbia, CPP
Melissa Doumbia, CPP, is a manager at Redpath and Company and leads the payroll services team for the Accounting and Management Outsourcing practice. She works with clients in a variety of industries and has a special expertise providing accounting and payroll services for the construction industry. Melissa’s payroll expertise includes return preparation and filing, tax credits, and tax and regulatory compliance. She also has experience providing union payroll and benefits and preparing and filing of Form 1099. Melissa received her B.A. in Political Science and International Studies from Macalester College. She has been providing accounting and payroll services since 1998 and joined Redpath and Company in 2022.
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