Payroll errors can lead to penalties, unhappy employees, and legal trouble. Watch for these common pitfalls:
1. Misclassifying Workers
- Labeling employees as contractors to avoid payroll taxes can trigger audits and fines.
2. Missing Deposit Deadlines
- Federal and state tax deposits have strict schedules; late payments incur penalties.
3. Inaccurate Tax Withholding
- Underwithholding or overwithholding affects employee trust and tax compliance.
4. Poor Record-Keeping
- Failing to retain payroll records for the required period (usually 3–7 years) is non-compliant.
5. Ignoring Local Regulations
- Municipal and county payroll taxes vary; ensure you’re registered and filing correctly.
Solution:
- Use automated payroll systems (e.g., Gusto, ADP)
- Partner with experts at TaxSprint for full compliance management.