Your human resources team has a lot on its plate, which creates opportunities for payroll errors to be made. Here are five common payroll administration errors that will cost you your employees (and potentially your business too):
1. Misclassifying independent contractors as employees.
A common mistake that some employers make is classifying independent contractors as employees. The compensation for independent contractors and employees is reported to the IRS differently. When a misclassification is made, it directly impacts benefits, employment tax withholding, and more, creating some serious consequences for your employees and your business.
2. Neglecting to provide 1099s to independent contractors.
Independent contractors and vendors that have provided more than $600 in services to your company will generally need to be issued a Form 1099. There are a few entities, such as corporations, that are not required to issue a Form 1099. Knowing this distinction and following the rules will prevent your company from being hit with penalties.
3. Not including the fair market value of gift cards in employees' compensation.
Do you occasionally incentivize employees with gift cards? If so, you should know that the fair market value of gift cards are considered to be taxable fringe benefits. In fact, most prizes and awards given to employees are subject to federal income and employment tax withholding.
4. Not depositing withheld taxes on time.
Employers are responsible for depositing taxes on either a monthly or semi-weekly basis. If an employer does not meet the deposit deadlines, it may be subject to late deposit penalties and interest.
5. Leaving out expense reimbursements from reportable wages.
In some cases, an employee's wages does not need to include expenses reimbursements. However, if an expense is reimbursed under a policy or plan that does not have a business connection to the expenditure, the reimbursement must be included in the employee's wages.
These are just a few of the most common mistakes that employers make with payroll administration, and there are obviously more payroll-related errors that will have negative ramifications on both the employer and employee.
Our experienced team at Summerlin-Roberts will help you avoid making these payroll administration errors and ensure compliance. We support clients using a variety of payroll services, and we can create a custom solution for your business based on your individual needs. With our full-service platforms and full-service administration, we'll alleviate your burden of payroll administration and provide you with an efficient process that offers both hard and soft cost savings.
Please contact us at Summerlin-Roberts to learn more about how we can help your business with payroll administration.