Equifax

Finance Blog

Seven Payroll Mistakes You Can’t Afford to Make

Written by Michael Alter on February 25, 2013 in Small Business  |   No comments

You will find many exciting new opportunities when starting your own small business. You’re taking your ideas and your passion into the marketplace, perhaps realizing a lifelong dream or making a lifestyle change. However, some aspects of running a business can take you away from…

payroll mistakesYou will find many exciting new opportunities when starting your own small business. You’re taking your ideas and your passion into the marketplace, perhaps realizing a lifelong dream or making a lifestyle change. However, some aspects of running a business can take you away from your core focus. Still, they need to be done, and paying your employees is one of the most essential functions for which you are responsible.

Mistakes in running your payroll could cost you time and money, and they could potentially cause trouble with the IRS—the last thing you want. There are common mistakes that should be avoided.

Let’s go over seven of the most important payroll areas of which you need to be aware:

  1. Accuracy. The first mistake small business owners make with payroll is perhaps the easiest one to avoid. When running a payroll, you need to make sure to verify dates, names, and hours. Going back to correct these kinds of mistakes can be time-consuming and frustrating. If you’re using a payroll service, make sure it allows you to preview your payroll before you give your approval.
  2. Schedule. Another easy way to avoid a costly payroll mistake is by keeping a close eye on bank holidays. You may have to process payroll a day early to avoid a delay in getting your employees paid.
  3. Payroll tax calculations. This is where it starts getting complicated. If you’re doing payroll yourself, you’ll need to keep up with tax laws and regulations and cross-check tax deductions with the IRS tax tables to ensure that you’re paying the proper federal, state, and local payroll taxes. If you’re using a payroll service or considering one, consider one that will do all the payroll tax work for you, including deductions, calculations, filing, and payment on your behalf.
  4. Check date vs. pay period. This can be a tricky distinction, but it’s important to note for tax purposes that the check date, not the pay period, determines when the payroll is reported. When doing tax filings, this can create confusion if you’re not careful to differentiate the two.
  5. Pre-tax vs. post-tax. 401(k) contributions are probably among the most common pre-tax deductions from gross wages. If your employees have other accounts like a Roth IRA, you need to understand the difference in how taxes are paid so as not to raise red flags with the IRS. Consult with the IRS, your accountant, or your payroll provider for help.
  6. Terminated employees. Employers sometimes forget when an employee worked for them. However, you still need to complete a W-2 for employees that were terminated during the year.
  7. Tax correspondence. If you’re working with a payroll provider, you must remember to send it any correspondence you receive from tax agencies. If you’re doing payroll yourself, take special care to read what the tax agencies send you and make any changes necessary.

It’s a good idea to consider how comfortable you are with running payroll for your business. As your business grows, it might be something that’s not worth the time, effort, and potential for costly mistakes. In the meantime, keep these seven tips in mind so you can get off to a good start.

Michael Alter is president and CEO of SurePayroll, a wholly owned subsidiary of Paychex. SurePayroll provides payroll services for small businesses.

No comments yet


Leave a Comment


Name :


Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.


Stay Informed Sign up for our FREE Equifax email Newsletter