Is your payroll process costing you?

Many small businesses ignore the importance of payroll compliance despite the costly repercussions and potential legal trouble it could cause.

But, most compliance issues are easy to solve and can actually be avoided with the right preparation and awareness. We’ve highlighted some of the most common payroll mistakes that businesses make and what you can do to avoid them.

1. Misclassifying Employees

The IRS takes classification seriously, with it being one of the most expensive payroll mistakes to make, which is why it’s essential for owners to classify employees correctly.

To prevent a misclassification, be sure to review the worker’s job and the level of control they have over completing it for you.

The level of control is important since it differentiates an employee from a contractor. A contractor is in control of the work themselves, deciding how, when, and where they will be completing it. However, an employee is someone that has tasks dictated to them and is being told how and when to do it.

2. Miscalculating Overtime

According to federal and Florida labor laws, most hourly employees need to be paid 1.5 times their regular pay rate for any hours worked over 40 in a week.

It is important to note that pay from things like bonuses, commissions, and incentives can raise an employee’s pay rate and will need to be factored into overtime pay.

Owners that are not aware of this rule or who accidentally miscalculate overtime pay should expect employee disputes, wage claims, and a tarnished reputation.

But, this issue can easily be avoided by having an hour tracking system in place and frequently checking it to ensure the times are recorded correctly. Timekeeping software or apps like QuickBooks can help with this by keeping information organized and saved.

3. Missing Tax Deadlines

It is no secret that missing a tax filing date will cost you. But, this cost is even higher for small business owners who are required to withhold and remit payroll taxes on specific days. Not filing means owners can expect a penalty fee and interest on their balance that will immediately begin to grow.

However, payments can be automated with tax software programs so busy owners don’t miss a date. Just be sure to review the submission deadlines with the IRS and cross check that the software program matches.

4. Not Submitting New Hire Reports

The New Hire Reporting Centre in Florida now states that employers are required to report all new hires and rehired employees within 20 days of their start.Given that this is a relatively new rule, owners should incorporate the report into the onboarding process and have it listed as an item on a standardized checklist. Or, consider uploading the report into your payroll software so that when you set up a new employee account, you are reminded of the form.

5. Ignoring Wage Increases

Florida’s minimum wage is set to increase to $15 per hour by 2026. This increase will be gradual and means that owners need to adjust their pay rates multiple times over the year. To avoid forgetting when an increase is set to happen, note the date in any payroll software you use and schedule automatic reminders that will be sent to your phone and calendar.

For owners who want to avoid the complexity that these wage increases add to payroll, consider outsourcing the task to a financial professional, like us at A.P. Accounting and Tax Services. Our dedicated team will be able to monitor changes on your behalf to ensure your business stays compliant year-round.

Give us a call at 407-328-5001 so we can streamline your payroll process today and you can get back to what matters most-running your business.

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