Getting payroll done has gotten so much easier than it used to be for small business owners. But there are still some minefields when it comes to state and federal compliance.
1. Business or Personal?
A great admin might want to help you in any way they can, including personal errands. But time spent having your admin fetch your dry cleaning and drug store prescriptions is not deductible as a business expense, even if it makes you more productive at work.
Be sure you separate your business payroll from personal payroll to avoid tangling with the IRS on this issue.
2. New Hire Report
It’s not every day that a small business needs to hire additional help, and the New Hire Report is easy to overlook. It’s due to your state within a certain number of days of your new employee’s hire date. Some payroll companies will file it for you, and some won’t, so it’s best to check. This will ensure you don’t make the common mistake of forgetting to file this report.
3. Worker’s Compensation
When you have employees, you need worker’s compensation. When you bring on your first employee, you’ll need to overcome this learning curve of figuring out what you need.
Even if you’re a veteran employer, you may have coverage holes in your worker’s compensation coverage. Do you have employees who work at home? Are you sure they are covered? In some states, employees have to be specifically named in the policy before they are covered to work at home.
Be sure you ask the right questions, so there’s not a risky gap in this essential protection for employers.
There are both state and federal notices that must be posted for employees to be able to read. California is especially zealous and liberal about issuing fines (up to $17,000 per location) for employers that do not have their posters, well, posted on workplace walls.
5. Employee versus Contractor
The proper classification of a worker as a W-2 employee or a 1099 contractor has long been an area of scrutiny for the IRS. The IRS has rules as well as court cases that have established the guidelines that exist in this area.
If you classify a worker incorrectly as a contractor when they should be an employee, you can be held liable for paying employment taxes on that contractor.
Bonuses can often be a spur of the moment thing or something that’s done at the very end of the year when we’re occupied with the busy holiday bustle. It can be easy to forget that the bonuses need to be run through payroll like all other wages so that the proper deductions and taxes can be calculated.
Use these six items as a checklist to avoid these common mistakes as well as reduce your business risk in the payroll compliance area. You may also want to check out a few helpful data automation tips you can use to easily avoid making those mistakes, and many others, which we are sharing below.
Five Efficient Steps to Take So You Don’t Make the Six Payroll Mistakes Mentioned Above
Are you manually entering data into your accounting system? If so, there may be a way to enter that data that’s faster, cheaper, and better. Data entry automation has come a long way. Here are five common ways to automate data entry so that it no longer has to be manually entered.
1. Bank Feeds or Online Banking
If you’re still entering your bank transactions, the good news is you have an opportunity to save a significant amount of time and money on your accounting. Almost all banks, and many credit unions, provide interfaces with your accounting system. This means that your checking account, savings account, and credit card transactions can be automatically entered directly into your accounting system.
There are two ways to do this:
2. A Smart Scanner
If a lot of paper flows across your desk, you can scan it in using a smart scanner that can parse the document and enter it straight into your accounting system. You will usually have a chance to edit and accept the data, which is far better than entering it from scratch.
3. Import and Export Functions
If you need to get data from one place to another, such as from a point of sale system to an accounting system, then using the export and import features of the software may be the most efficient method. There are also software apps that help you scrub the data and get it ready for the receiving system.
If you ever convert from an old accounting system to a new accounting system, this method will come in handy to get your historical data moved.
4. Interfaces and Programmers
If you have a high volume of transactions that need to move from one place to another on an ongoing basis, it may make the most sense to employ programmers who can build an interface. Alternately, some systems can talk to each other already; they just need to be plugged into each other correctly.
5. Smartphones, Tablets, and Field Service Hardware and Software
If your sale occurs out in the field, don’t wait to get the data into your system when you get back to the office. You may be able to complete the sale right out in the field, so that when you get back to the office, you can call it a day instead of keying in the day’s work.
Mobile accounting apps are where to look for this form of data entry automation.
In 2020, consider taking on the goal of no more manual data entry to avoid the common payroll mistakes above and make the entire financial side of your business easier. If we can help you with the automation process, let us know.
Shannon has been consulting with small businesses for over 10 years. After 2 years in public accounting she saw a need to work for small business owners to teach them how to grow financially healthy businesses. She has built on her Master of Accountancy degree from Manchester University by becoming a Certified Profit First Professional and a Certified QuickBooks ProAdvisor. When she’s not meeting with entrepreneurs or assessing their businesses, she enjoys time with her husband and 2 children serving in their community, playing and watching sports, marveling at nature or reading a good book.
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