Being a small business owner can mean doing payroll yourself. This requires you to become familiar with the basic of the payroll system and the labor laws that govern employee paychecks. To help you avoid making any big mistakes when it comes to payroll, we’ve outlined the most common errors below so you can become familiar with them.
Setting Up Payroll Wrong
You don’t want to get this one wrong as it could not only cost you money but can also cost your employees money. You must be sure that you are taking out the appropriate amount of withholding taxes from each employee’s paycheck.
If you are not familiar with the tax rates, it’s best to use an online paystub creator or hire an experienced accountant to do the job for you. This must be done correctly or you may owe back taxes as well as set your employees up for owing back taxes. Don’t let that happen!
Calculating Overtime Wrong
A stray away from the usual pay time can increase the likelihood of making a mistake on calculations. Overtime is a big pay period that receives many blunders from small business owners.
The Fair Labor Standards Act, also known for short as FLSA, requires all employers to pay their employees a premium amount for time worked over their established regular period. Each State and Local Government has different specific requirements for these overtime hours.
Late Tax Payments
Each small business is required to apply for a local, state, and federal payroll tax identification number. This is what you will use to submit your payments to these different sectors of the Government for the taxes that you withheld from your employee’s paychecks.
The taxes you must pay to the Government can be due the next day after a paycheck is issued, biweekly, or even monthly. Checking with the different Government departments will help you to learn when your tax filings are due. If you don’t file these payments on time with each respective Government, you will owe penalty charges that come along with interest charges.
Forgetting About Payroll
As a small business owner, you may find yourself jumping from task to task, not knowing where the time went. It’s very easy to forget about doing payroll if you don’t have a strict reminder of when to do it. Those who rely on memory to fill out their payroll, tend to make costly mistakes.
If you rush through payroll at the last minute, it’s very likely you may overpay or underpay an employee. Both of these are mistakes that will take more time later to correct. In addition, forgetting to file payroll completely can lead to some very unhappy employees.
It’s best to establish a time each week that you devote solely to completing payroll. Don’t ever skip that time, but make it a must. You can set up reminders on your phone or computer that it’s time for payroll. Also, there are some online payroll services that will remind you of when payroll is due.
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