Common Payroll Mistakes

As many of us already have the misfortune of knowing first-hand, the IRS does not mess around when it comes to collecting unpaid taxes. Closing the tax gap is a huge priority for the IRS, and one area in which they are especially focused is in payroll taxes. In fact, the IRS itself estimates that roughly 40% of small to medium sized businesses end up paying a payroll related fee each and every year! Here are a few of the most common errors that lead to such fines:

• Classifying employees as independent contractors. There are many differences in your obligations towards employees and contractors; and getting the classification right is very important!
• Not issuing 1099s. Unless you are a corporation, it is your duty to issue 1099 to all vendors and contractors who are paid more than $600 over the course of the year.
• Failing to include gift cards and other rewards as taxable payment. Any rewards issued to your employees are generally considered a form of payment, and must be reported as such.
• Failing to include most forms of reimbursement. Most reimbursements must be reported along with payroll. Examples include travel and other business-related expenses.
• Not depositing withheld taxes in a timely manner. The government takes this very seriously–after all, if you are withholding taxes from payroll but not depositing them, it appears that you are stealing from both your employees and Uncle Sam!

A Simple Solution

The average fee paid by small and medium sized businesses for payroll mistakes is over $800! A cheaper, more stress-free solution is simply outsourcing your payroll to a qualified payroll service. Not only does this allow you to avoid the risk of fees, it also clears up lots of otherwise unproductive time and allows you to focus on the aspects of your business that actually generate income! Check out Precisepayroll.com for more information!