Saturday, September 1, 2012

Payroll Pitfalls To Avoid

As small businesses grow to the point where they need to hire people, they need to begin thinking about payroll. They may decide to pay a company to do it for them, or they may handle it themselves.

If they choose to keep payroll in-house, they need to be aware of the most common payroll mistakes made by small businesses. Here are a few costly payroll pitfalls to avoid:

Being Late with Payroll

This is an all too common error made by small businesses that do not keep track of the payroll calendar. Not only does this apply to payroll checks sent to employees, but it also includes taxes paid to the government, tax forms that need to be sent to the government, and other payroll deductions that need to be sent to the appropriate regulatory body.

Know the Difference Between Contractors and Employees

It is less expensive to hire a contractor because you don’t have to pay as much tax as you would for an employee. However, there are certain criteria that must be meant to receive that classification and you need to be aware of them. You can get fined if you are supposed to be paying taxes on an employee and you don’t because you think they are a contractor.

Don’t Mishandle Exemptions and Contributions

Make sure you know how to correctly set up any exemptions or contributions to areas such as health insurance and retirement plans. One issue you will need to sort out is whether you should deduct them before or after taxes.

Know the Rules

Numerous rules govern employees and payroll. You can get in deep trouble if you don’t follow them. This includes dealing with overtime or confidentiality on an employee’s payroll, along with employment notices that must be displayed inside the business.

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