I asked our payroll experts what the most common payroll mistakes American small business owners make are, and here are the top three to avoid!
1) Late Taxes
Late tax payments are a concern for new small business owners. With a whole bunch of filing dates for different parts of your business, things can easily get mixed up or missed altogether. We have identified two of the forms that get filed incorrectly most often, and explained how to get it right.
When you register your business with the IRS, they will send you:
a. Important forms you need to file
b. Your tax deposit schedule
One of the forms the IRS requires is Form 941, due quarterly (or in some cases the Form 944, due annually). This form is often confused with the tax deposit schedule, also sent by the IRS. New employers will often try to deposit taxes quarterly (when their Form 941 is due) instead of on their tax deposit schedule. It sounds like a small mistake, but penalties and interest are never fun!
If you don’t know when you are required to deposit taxes you can always get in touch with the IRS at (800) 829-4933.
2) Missing essential payroll records
Another mistake new employers make is failing to properly report when they hire a new employee. There are a few things to keep in mind when you are hiring. First, you are required to fill out a form called the I-9. This is an employment eligibility form that your employees must fill out to be able to work legally. You can check out the the I-9 form here. Second, remember that most states require some type of reporting for new hires in addition to the I-9 form. You can find resources on new hire reporting in each state on the Small Business Association website.
3) Trying to understand tax tables on your own
Calculating taxes is not easy, especially when State and Federal governments make changes to tax tables regularly. There are a lot of details to take into account, and employers who try these calculations by hand usually (unfortunately) miscalculate their employee’s net pay. Employers should consider using payroll software to calculate withholdings, or hire a professional to help. Payroll by Wave is constantly updated with tax law changes in all jurisdictions, so you’re covered.
Now that you’re going to avoid the most common Payroll mistakes, make sure to keep all of your records organized and accessible. Payroll by Wave has a File Storage section in your employee’s profile where you can keep their forms in one place!
The information and tips we’re sharing in this article are meant to be a starting point for your year-end tax prep, so you can be informed and feel confident when working with your accountant. Be sure to check with a tax expert in your country or region for any specific advice you need, as each business (and tax district) is different. As our lawyers would say: “This article is for informational purposes only. It should not be considered legal or financial advice.”