LUTZ BUSINESS INSIGHTS
5 Common Payroll Mistakes and How to Avoid Them
KRISTEN CURTIS, CLIENT ACCOUNTING SERVICES MANAGER
Make a mistake on an invoice, and you’ll displease a customer. Commit an error while you’re preparing payroll, and you may have a bigger price to pay. You’re accountable to employees and regulatory agencies, all of whom expect absolute accuracy. Not providing that can have an impact on your employees’ livelihoods. Penalties and interest levied by taxing agencies can take a toll on your company’s own financial health.
So, be proactive. Know where missteps can occur to avoid them. Here are five common payroll mistakes and how to avoid them:
1. Classifying employees as contractors
As an employer in the age of the outsourced/single engagement economy, you may be hiring independent contractors to complete some projects. If this makes sense for you in terms of your workload, you’ll discover there are tax advantages, too – as in, you don’t have to withhold and pay their income taxes or employment taxes.
But, be very careful to make a distinction between independent contractors and employees. The IRS scrutinizes these employment arrangements; click here for an explanation of the differences.
2. Neglecting to process and store all payroll records
According to the U.S. Department of Labor, you must keep the records for at least three years. And they need to be comprehensive (click here for a list of exactly what must be available for inspection).
3. Omitting required payroll elements or incorrect calculations
If you only had to issue paychecks every two weeks and withhold and submit payroll taxes, that would be complicated enough. But there can be so much more. You must:
- Know the difference between pre-tax and post-tax deductions.
- Administer bonuses, expense reimbursements, garnishments, etc.
- Understand what employees owe and what you, as an employer, owe.
- Know exactly which agencies will expect you to submit payroll taxes (federal, state and local where applicable, unemployment, etc.).
4. Missing deadlines
This applies to actual pay periods as well as deadlines for filings and payments due to taxing agencies as well as payments for deductions for retirement plans, garnishments, etc. If you miss payroll tax payments and filing deadlines, you can be assessed penalties and interest. Let that go on long enough without realizing you’ve made a mistake, and these add up.
There’s no reason to be tardy with your year-end reporting, either. Employees need their W-2s to file taxes, and your accompanying payroll reports are expected to be completed on time.
5. Using a payroll method that doesn’t work for you
Manual payroll-processing is a time-consuming burden and is prone to errors. Do-it-yourself websites can also leave you with many questions. We can help you determine what would work best for you, and add our services where they fit. Contact us at your convenience, and reclaim those hours that could be spent doing what you do best: managing your business and helping it grow.
ABOUT THE AUTHOR
KRISTEN CURTIS + CLIENT ACCOUNTING SERVICES MANAGER
Kristen Curtis joined the firm in 2000 and serves as a Client Accounting Services Manager. She has significant experience in small business accounting and advisory services; new business consulting; and software implementation and training.
AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- Certified Public Accountant
- BSBA in Accounting, Iowa State University, Ames, IA
- Presbyterian Church of the Cross, Session Member, Christian Education, Committee Member
- P.E.O., Philanthropic Educational Organization, Member
- Hiring an Independent Contractor? Your Responsibilities
- 5 Common Payroll Mistakes and How to Avoid Them
- Onboarding Your First Employee? Your New Tax Responsibilities
- Why You Should Automate Expense Reporting, and How to Do It
- Service-Based Business? How QuickBooks Helps You Track Time
- 4 Ways QuickBooks Helps You Accelerate Receivables
- Are You Following Best Practices for Dealing With Form 1099-Misc?
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Provider relief fund reporting
The Provider Relief Fund (PRF) Reporting Portal opened for Reporting Period 2 on January 1, 2022, and will remain open through March 31, 2022, at 11:59 PM ET. What you need to know:
- Who needs to report? Providers who received more than $10,000 in PRF Payments from July 1, 2020, to December 31, 2020.
- The deadline to use these funds was December 31, 2021.
- HRSA Resources Available to assist with reporting:
- Post-Payment Notice of Reporting Requirements
- Lost Revenues Guide – Reporting Period 2
- What’s New in Reporting Period 2 Fact Sheet
- Reporting Resource Guide – Reporting Period 2
- There is a very comprehensive Reporting Portal User Guide (with many helpful screenshots, definitions, examples, etc.)
- There are also Data Entry Worksheets to assist providers in preparing to report through the portal
- Contact the Provider Support Line at (866) 569-3522
Providers who were required to report in Reporting Period 1, but did not report:
- Providers who received one or more payments exceeding $10,000 between April 10, 2020 - June 30, 2020, were required to Report in Reporting Period 1.
- HRSA states that “You are out of compliance with the PRF Terms and Conditions and must return your Payment Period 1 PRF payment(s) to HRSA.”
- There are additional instructions on the HRSA site for returning payments and other information regarding “non-compliance”
Upcoming Reporting Requirements:
|Period||Payment Received Period||Deadline to Use Funds||Reporting Time Period|
|3||January 1, 2021, to June 30, 2021||6/30/2022||July 1, 2022, to September 30, 2022|
|4||July 1, 2021, to December 31, 2021||12/31/2022||January 1, 2023, to March 31, 2023|
Last Updated: 1/14/2022
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