Top 5 Mistakes Payroll Processors and Bookkeepers Make

Published: 13th August 2009
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Here are the Top 5 Mistakes Payroll Processors Make, and how you can avoid the penalties and pitfalls that can happen to unfortunate business owners.

Choosing a Payroll Processing Company, or your internal Payroll Bookkeeper is a serious task. The amount of payroll taxes paid to the different agencies, as a percentage of payroll, can easily be forty percent (40 percent) or more of the total payroll. The amount the employer is responsible for remitting to the federal, state and local agencies is a combination of the employee withholding, employer and employee Social Security and Medicare, plus the other smaller taxes such as disability and unemployment. The person or firm you rely on to submit these items must have quite a bit of knowledge of the taxes, tax laws, rates and deadlines. The Top five Mistakes:

1. Missing Deadlines: One of the most common mistakes made is missing deadlines, such as monthly tax payments, or not getting an ACH file uploaded in time and causing employees to not get paid on the day expected.

2. Data Entry Errors: Making errors in data entry are a huge and potentially very expensive mistake. Entering the wrong social security number for a given employee may cause many problems, such as taxes not being reported properly to the state department and IRS. Entering the wrong address for an employee can cause the employee to not receive their W-2 in the mail on time. There have been several times when a payroll processor has entered the wrong check amount or wrong date on an ACH upload and has caused the employee to be overpaid or not paid on time.

3.Agency Payments gone Awry: Handling garnishments and child support payments wrong is yet another mistake payroll processors make. These special deductions have to be handled with great care to ensure the payments are processed correctly and in a timely fashion, and properly deducted from the employee's paycheck.

4. Not Double-Checking the Data: An all too common error made by payroll processors is being too reliant on their payroll processing software. Programs can have glitches, and it's up to the processor to take whatever steps necessary to ensure the payroll is processed correctly and taxes are deducting correctly. In-House bookkeepers using QuickBooks® often trust that the software is completely accurate. In fact, it is easy to create errors in QuickBooks® that cause the accrual (adding up) of payroll taxes to be incorrect. Bookkeepers make a mistake on a payroll check, delete it and reissue it. Now the tax calculations are no longer correct, and in this case can usually only be fixed by an outside expert. In this case, the problem is this usually goes unnoticed by the bookkeeper and business owner, until a tax notice is received from the IRS or State demanding additional payments.

5. 1099 Forms Overlooked: Another very common mistake is not sending out 1099 forms on time to independent contractors, which should be done to each and every independent contractor who gets paid more than $600 in a year. Each 1099 contractor should receive their 1099 no later than the end of January.

It is a fact that mistakes happen even in payroll, but the key is handling the errors correctly. The best solution to all these very common mistakes is to have specific procedures in place to ensure that the payroll is handled efficiently and effectively. Make sure there is more than one person in the company who is capable of processing payroll and making tax payments. You must have a back-up plan for sickness, vacations, and personal injuries. An employee can't miss getting paid and a tax payment cannot be submitted late or not at all just because one payroll processor is sick or had an emergency come up. Also, you must make sure that you know the rules and regulations of the tax withholding and the tax filing due dates based on your filing status. An example would be monthly tax payments due the 15th of every month and quarterly tax returns due by the last day of the month following the end of the quarter.

As a payroll processing company we have several specific procedures in place to make the payroll process run smooth. We double check everything, and don't rely only on our payroll software. We double check payroll tax calculations every payroll .

Pink Payroll is a specialized and customized payroll processing company serving customers in all 50 U.S. States from Delmar, CA.

More questions can be answered by calling 800.995.0308 or emailing.

We have more Payroll Resources on our site. For a quick quote, go to our Quick Quote form.

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