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Operating a business can be exciting and fulfilling, but it can also be challenging, especially when it comes to handling payroll. A business owner wants to keep stakeholders happy and one of the most important stakeholders is staff who expect to be rewarded financially for their skills. TMD Accounting provides you with these tips to help you avoid payroll errors and offers details on how outsourcing may be beneficial.

Payroll Delays

One common mistake when processing payroll is failing to complete the process in a timely manner. This can lead to delays in employees receiving compensation. With many people now setting their bills to be paid automatically and if their payroll is delayed, this could lead to overdraft charges as well as payments being returned for insufficient funds. This can also lead to dissatisfaction among employees. Small business accounting services recommend running payroll three to four days prior to payday. It is also important to keep in mind that bank holidays may also lead to a delay, so if a holiday falls around the date you normally process payroll, you may want to add an additional day of processing, so your employees are paid on time.

Tax Payments

Once you withhold taxes from your employees, you must then pay them to the proper entity. Most employees will have Social Security, Medicare, federal and state taxes deducted from their check while some areas may also have a county or city tax. In addition, you may have to withhold insurance payments or payments to retirement funds. It is imperative that anything withdrawn from an employee’s paycheck is sent to the proper location. South Jersey accounting services understand the law and are able to make sure that the proper amounts are withdrawn and that payments are made in a timely fashion and sent to the proper entity. Failure to properly handle employee withholdings can put your business at risk. In addition, paying your taxes late can incur a 10 percent or higher penalty.

Employee Classifications

One of the biggest mistakes businesses make in payroll is not properly classifying employees. Your staff is generally classified as either an employee or an independent contractor. Often, businesses will try to claim a staff member is an independent contractor in order to avoid paying payroll taxes. However, there are specific requirements that must be met for an employee to be an independent contractor. For instance, if your employee must report to work at a certain time each day and must request time off, they are likely not an independent contractor. Using the wrong classification can lead to significant penalties, according to a small business accountant in NJ.

Improper Records

Another common mistake is not keeping proper payroll records. Small business accounting services point out that pay stubs and other forms may be needed by employees many years after you issue them. This means you need to archive the data should they be needed in the future. In most cases, you will need to retain records for between three and seven years, although some may require retention even longer. If you issue paper checks on occasion, such as for bonuses, you will also need that information included in your payroll system.

Expense Reports

If your employees have expense accounts, you will also need to track those in your payroll system. South Jersey accounting services say that in order for an expense reimbursement not to be taxable, it must be for a documented expense that is business related. For example, if you have employees who travel, their meals and lodging are a business expense, so they are not subject to payroll withholding. However, you must have documentation to confirm that these were valid expenses and not actual salary. If employees take home company cars, that may be a taxable benefit as well.

Delayed W-2 Forms

The law requires that every employee receive a W-2 form unless they are an independent contractor, in which case they would receive a 1099 form. Those forms must be mailed to your employees no later than January 31 each year. Filing deadlines may vary depending on your state and local government, a small business accountant in NJ says.

Payment of Unemployment Tax

The federal government requires all states to offer unemployment compensation programs. Failure to pay state employment could result in the loss of federal unemployment credits at the end of the year. You may also pay an incorrect rate which is why using small business accounting services is recommended. In addition, some states. Have both employee-paid and employer-paid unemployment taxes.

Payroll Outsourcing

There are several benefits to outsourcing your payroll. South Jersey accounting services are able to provide you with expert tax advice while also making sure your taxes are paid in a timely fashion. Outsourcing payroll can also save you time. Research shows that the average business owner spends almost five hours calculating, filing and paying payroll taxes every quarter. Working with a small business accountant in NJ frees up that time so you can spend it building your business.

Outsourcing also provides better security as your employee information is protected. Employees are also more satisfied as they are paid on time and their paychecks are calculated correctly. There is evidence that just two payroll errors will lead over half of your workforce looking for another job.

If you would like some help with managing your payroll, contact TMD Accounting to see how our experienced team can help. We offer South Jersey accounting services that are flexible, reliable, and affordable. With over 40 years’ experience, our family-owned and operated accounting agency continues to live up to our motto: “Where numbers matter and people count.” Contact TMD Accounting today by calling 1-856-228-2205.