Payroll administration may be a mundane task, but it’s one that can create some serious repercussions if it’s ever done wrong. Monetary penalties for things like non-remittance or late remittance of taxes, incorrect calculation of overtime pay and improper retention of records can be severe, and can be especially harmful for small business with fewer resources to fall back on.
Almost as frustrating and harmful as wasting money on penalties or fines is spending irreplaceable time fixing payroll mistakes. And there are other consequences, harder to measure but very real, of botching employee payroll, such as added stress, the possibility of increased scrutiny from taxing authorities, loss of employee goodwill and – in the extreme – jail time.
Payroll processing is complicated because it’s affected not just by the complex tax codes at the federal, state and sometimes local levels, but also by regulations of the U.S. Department of Labor. One accounting firm estimates that there are about 100 DOL rules that affect payroll management. State labor departments and state insurance commissioners may also have regulations that pertain to payroll.
In addition to making the proper withholdings and deductions for taxes and benefits, employers may also be ordered to garnish wages for things like child support, back taxes, criminal restitution, student loans and private debts. Employers who fail to comply with wage garnishment orders can be held liable for the employee’s financial obligation, as well as collections costs and legal fees, not to mention punitive fines.
Some other complexities that payroll managers may have to handle accurately in order to avoid harsh consequences are:
- Calculating and paying overtime correctly. Overtime wages due but not properly paid not only have to be reimbursed to the employee, but there can be government penalties of up to 100 percent.
- Accounting for and allocating tip income.
- Properly classifying workers as employees or independent contractors – and paying the applicable back taxes and penalties for illegally treating an employee as a contractor.
- Remitting taxes and the proper tax forms in a timely way. The later taxes are paid, the more penalties and interest accrue.
- Retaining complete payroll records for at least three years, or facing a fine up to $10,000. Repeat offenses can result in jail time.
What’s the best way to avoid these severe sanctions? Consider the alternative that an ever-increasing number of small businesses are making the move to – payroll outsourcing. By using an experienced contract payroll service, you’ll have the peace of mind of knowing that this important business function is being handled by payroll specialists who understand and keep current on all the relevant legislation and regulations.
Get the assurance of having your company’s payroll done by a specialized professional from Padgett Payroll Services. We’ve been providing small business payroll services for more than four decades, and we serve thousands of companies from coast to coast. Call Padgett Payroll today at (706) 548-1040.
Do you have the support you need to manage your small business bookkeeping?
Contact us to schedule an appointment to speak with a local small business advisor.