Don’t Make These Common Small Business Payroll Mistakes (Part 2)

In part 1 of this post we covered two of the most common mistakes that employers make when it comes to payroll: improperly classifying employees as 1099 contract workers (and not withholding or paying the right employee/employer taxes), or withholding the wrong amounts from employees during payroll. In this part we’ll cover some additional mistakes that you don’t want to make as a small business owner when it comes time to process payroll.

Small businesses often make payroll mistakes that can cost your business a lot.

3: Bad Records

If payroll isn’t your core competency as a business (like it is for payroll tax services), you might not think much about the importance of having good records in place. But even small mistakes, like mistyping a Social Security number or having errors in employee’s timekeeping records can lead to significant issues with the IRS and with your employees. The most important thing is to have good records so your tax filings are not delayed or flagged for a problem. If the IRS catches one of these issues it can result in large fines or penalties, as well as all the time and money it takes to go through and correct the errors.

Avoid this issue by maintaining accurate records, ensuring proper training for your staff who are onboarding new employees, and consider having a third-party payroll tax company run payroll to help you track and manage all that information with easy-to-use tools.

4: Lost Information

If all of your payroll and timekeeping is digital, you need to have a backup in place in case something goes wrong. If all that information is housed on a single computer, just about anything can cause data loss:

  • Human error that overwrites or deletes files
  • Computers that crash
  • Viruses, malware, or ransomware attacks
  • Natural disaster that eliminates servers or physical backups

With limited staff and resources, having your files backed up on the cloud or even with paper copies available is critical to avoid data loss. This can help you avoid the risk of losing critical information you need to process payroll every week or month.

5: Tax Deadlines

If you have poor records and you’re not paying close attention, it can be easy to miss tax filing deadlines for your small business payroll. With the Affordable Care Act there are more reports and information that you have to share, and missing even one payment or filing can cost you a lot.

The easiest way to avoid this issue is having someone with a lot of experience in all the forms and payments. A small business payroll tax service can help with all of this and take the load off your plate.

Small business owners have a lot to think about, and if payroll is something that is hard to keep up with, consider hiring a small business payroll service to avoid these mistakes, which can save you a lot of money and stress.