Our Thoughts

Common Payroll Tax Mistakes to Avoid

Apr 7, 2014

Owning and running a business comes with its challenges. However, one of the biggest responsibilities a business owner is faced with is paying employer payroll taxes. The responsibility is great and the penalties for missteps payroll tax errors make it essential to do things right.

Some Payroll tax mistakes I see employers make include:

-Misclassifying workers

One of the most talked about employment tax issues and one that frequently results in payroll tax audits is improper employee classification. It is a common mistake to make if you don’t know the difference between the two types of employee classification. You don’t have the choice to select the worker classification. It depends on whether you have sufficient control over the worker. Misclassification of workers can mean fines and penalties, as well as back taxes.

-Choosing to pay creditors before the IRS

Sometimes business owners run into an influx of cash flow. Perhaps paying rent or the utility bill may seem important, but your payroll tax liability is more important. As an employer you are the responsible party of your employees’ withholding wages and knowing how often to deposit taxes. The IRS takes this very seriously and will charge interest and penalties to businesses for not withholding enough payroll taxes for emplyees.

-Verifying employee eligibility

I’ve come across many business owners who do not maintain proper employee records. Federal law requires employers to verify that all workers are eligible to work in the United States. Form I-9 is used to determine a worker’s eligibility to work in the United States. E-Verify is an online database that can be used by employers for employee verification. Recent legislation now requires some states to use E-Verify. Be sure to check your state’s requirements. Some states that currently require E-Verify are: Alabama, Arizona and Utah. We offer employment screening packages to make sure you are in compliance with these screening tools.

There are many implications for businesses that are not correctly addressing payroll tax issues. There may be industry- specific payroll issues that affect your company. It’s important to have a professional analysis of your specific payroll situation to maintain compliance with the complex IRS tax rules. To avoid these costly payroll mistakes, contact Extra Help today to learn more how we can be a partner for your company!