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5 Common Payroll Mistakes and How to Avoid Them

April 26, 2021

Throughout the years, TruPay has served companies of all sizes and in all industries nationwide. Here is a list of the five most common payroll mistakes that we've seen organizations make. 

5 Common Payroll Mistakes and How to Avoid Them

1. Incorrectly Classifying Employees

Freelancers, consultantspart-timefull-time, exempt & non-exemptChances are you have more than one type of employee working for you, and employee compensation gets reported to the IRS differently depending on how each employee is classified. Employee misclassification and incorrectly reporting tax information can carry penalties, bring lawsuits, and trigger audits.

 

How to Avoid This Mistake

Research and review the U.S. Department of Labor’s Classification guidelines & resources.  Audit each of your company's current and listed positions to ensure they meet the requirements for each classification. 

 

2. Missing Tax Payment Deadlines

Most companies are required to deposit taxes on a monthly or semi-weekly basis depending on the total taxes reported during a four-quarter lookback period. When taxes reach certain amounts, they must be deposited the next business day. You must stay on the schedule determined by your deposit calendar or run the risk of incurring penalties. 

 

How to Avoid This Mistake

Keep track of important dates on a calendar to avoid missing any deadlines. Download the TruPay 2021 Payroll Calendar with:

  • Pay periods
  • Federal caps and limits
  • Federal holidays
  • Tax deadlines & more

    2021 Payroll Calendar

 

3. Misprocessing Garnishments

Garnishments are defined by the US Department of Labor as "a legal procedure in which a person's earnings are required by court order to be withheld by an employer for the payment of a debt such as child support". Several mistakes can lead to misprocessing garnishments including:

  • Not taking Action on Garnishments
  • Failing to Respond Correctly
  • Firing an Employee with Debt

Companies are liable for all court orders and can be sued for garnishments of their employees if not processed correctly.

 

How to Avoid This Mistake

Research Wage Garnishments and the Consumer Credit Protection Act (CCPA) that protects an employee's rights regarding garnishments. The garnishment process can difficult to understand and differs depending on the state. Turning to a Garnishment Service Provider, like TruPay's Garnishment Services, can ensure your company is in compliance with garnishment orders.

 

4. Calculation Errors

Payroll involves lots of calculations and lots of opportunities for errors.  The most frequent calculation errors companies make are Hour Tracking and Overtime. Many common practices contributing to these errors include:

  • Calculating overtime over a two-week period instead of 40 hour period
  • Missed or double-counted time punches
  • Out-dated Systems and Hand Written Time Tracking
  • Lack of understanding with current wage law requirements & rules

How to Avoid This Mistake

Properly train your employees on time tracking regarding mandated breaks, overtime, time rounding & missed punches.  Create protocols & systems to catch common mistakes. Automate your time tracking system and create company parameters and guidelines. Refer to the US Department of labor for up-to-date information on Overtime, Minimum Wage, & other wage laws.  

 

Read more on how to Reduce Payroll Errors.

FACTSHEET

 

5. Undelivered Tax Forms & Paperwork

Forgetting to send proper tax forms and paperwork required by law could lead to high penalties. A common tax form that employers5erty overlook for contract & independent workers is a 1099 form. Any vendor or independent contractor who provides your company with more than $600 in services must receive a 1099 from you by January 31st of the following year.

How to Avoid This Mistake

Keep accurate records of all contract and employee work done for your company during a calendar year and ensure those paid more than $600 in services are sent a 1099 form before the January 31st deadline. 

 

 

Partner with industry experts

#1reason we see businesses make these mistakes make is trying to do too much themselves in the interest of saving a few bucks. Small business owners who try to deal with payroll matters on their own tend to experience more stress and may make costly errors.

These 5 mistakes, plus many others, can be avoided by enlisting the services of a professional firm. The money you think you are saving might end up costing you more in the long run in the form of fines and penalties.

TruPay's trusted team of experts understands the ins and outs of payroll across state lines and always has up-to-date knowledge of government and industry policies, regulations, and changes. We Deliver the Perfect Paycheck — Every Time with experts in:

  • Tax Management
  • Wage Garnishments
  • Workers Compensation

 

Learn more about how Build a Reliable Payroll Foundation with TruPay's Payroll Solutions.

Payroll Solutions

 

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