Transcript for "jeff kuzmich - Migrate_OD_Top_10_Payroll_Errors_08282025_5002068":
Hi there, and welcome to top 10 payroll errors and how to prevent them. My name is Marisa Pompa, and I'm an HR services manager here at Paychex. Before we get started, I do need to advise that this presentation does not constitute any legal or accounting advice and is for informational purposes only. Small business owners often handle payroll themselves to save cost, but it's more complex and time consuming than it seems. With shifting laws, tax rules, and staff changes, even small payroll mistakes can lead to costly fines and compliance issues that put the business at risk. Today, we're going to: Identify the 10 most common payroll mistakes businesses make Understand the costs and risks tied to each error Learn easy, actionable tips to avoid each mistake and see how a reliable payroll and HCM system supports long term compliance and accuracy. So let's begin by defining payroll costs. What are they? Well, payroll costs are the total expenses associated with compensating employees for their work at your business. These include base pay, bonuses and commissions, paid time off or other leave, employer's portion of payroll taxes, employee benefits contributions, workers' compensation insurance, payroll administration costs. I'd like to start by getting a gauge on the types of payroll mistakes you're most commonly challenged with. You'll see a pop up on your screen. Now there's no right or wrong answer here. I just want to figure out how you're currently tracking on this issue. Here's the poll. What are your most common payroll mistakes? A) Incorrect payment amounts B. Sloppy record keeping C. Late tax filings D. Misclassifying employees or E. All of the above and more. No matter what your challenge is, this webinar is going to help you avoid these mistakes and prepare you to simplify and make payroll a success. Let's dive in. Number one Filing Late. The IRS stipulates a due date for depositing payroll taxes. Failing to file on time could bring a 15% failure to deposit penalty. A late payroll tax return also incurs fines. For each partial or total month that a return is not filed, you can receive a point 5% penalty based on your unpaid tax bill. Number two, tax form errors. Slip ups on tax forms may cause you to remit too much or too little in payroll taxes. Mistakes may also impact reconcilement of W-2s with year end tax returns. Before you submit your return, double check your figures, re verify your totals, ensure amounts are entered on the correct lines, make certain each line item coincides with your financial statements and payroll reports, and be sure to sign your return. Number three: Submitting incorrect amounts. The IRS can penalize you for submitting the wrong amount of payroll tax. However, the agency may forgive first time mistakes or for errors arising from a reasonable cause, rather than willful neglect. Penalties can range from 2% to 10% of total payroll, and they start occurring on the due date of your payroll taxes. Number four, misclassifying employees. Your workers are typically categorized as employees or independent contractors. Misclassifying employees as independent contractors will result in unpaid payroll taxes. Remember, employees must fill out a Form W-four so that you can deduct the appropriate taxes. Contractors submit a W-four for tax purposes and those paid $600 or more in a year must complete and submit a Form ten ninety nine, making them responsible for federal and state taxes. The determination of a worker's status as an employee contractor is critical to ensuring compliance with payroll tax requirements as well as wage and hour laws. Avoid costly misclassification errors by leveraging ten ninety nine Payment Solutions to help ensure accurate ten ninety nine payments, filings, and compliance. Number five: Having the wrong employee details. When processing payroll, inaccurate or outdated employee information may cause trouble with the IRS. Ensure you have the right data on your workforce such as: your full names, employment start and or termination dates, tax filing numbers, dates of birth, your current addresses, and payroll details including hourly rates, gross wages, and employment status. Number six, late or missed payroll. It happens, but it does have consequences. Employees will be unhappy and you may affect your company's bottom line if you inadvertently overpay or underpay workers. Employee departures also pose risks, as some states set time limits on employers to provide final paychecks, and if the final check is not delivered timely, you could incur a penalty. Number seven paying the wrong amount. If faulty information is initially entered into the payroll database, problems are bound to occur. Establish safeguards on your payroll system and double check all employee information, tax withholding amounts, and payment information. Number eight, overlooking bank holidays. It's imperative you know the holidays for which your bank is closed so you have time to adjust your payroll processing dates to prevent any delays. And number nine, depositing and reporting employment taxes incorrectly. After collecting payroll taxes from your employees and contributing your share, you must submit those taxes to federal, state and local tax authorities. The IRS will assign you a deposit frequency based on your past liabilities. Number 10 Not maintaining adequate payroll records. State and federal laws and or regulations call for businesses to maintain specific employee records. Some local and state jurisdictions may have record keeping requirements that vary from federal requirements. So it's imperative that you are familiar with such requirements in the locations in which you do business. We've learned that managing payroll can be extremely costly for many businesses, and the risks of fines is especially dangerous. Did you know that about a third of employers make payroll errors, and 40% of small businesses face about $845 a year in IRS penalties, oftentimes for missed payments? We recommend three simple actions to help you avoid payroll mistakes. First, understand complex tax laws, the most common being income tax. Most businesses must file annual returns and the form depends on your business. Estimated tax: Self employed must prepay income, self employment, and AMT taxes. Self employment tax: This covers Social Security and Medicare for the self employed. Employment tax includes Social Security, Medicare, Income Tax Withholding, and FUDA. And finally, Excise Tax this applies to certain products, equipment, or services. Second, calculate reminders for yourself. Small businesses often lack dedicated payroll staff so owners must learn the rules themselves. Owners must verify details like IRS mileage rates and ensure all tax forms are the latest versions. Using outdated forms may cause rejections and delays. Stay current on all federal and state wage tax and payroll requirements to stay compliant. And the third step you can take to avoid mistakes is to outsource for help. Keeping payroll in house can create hidden, long term costs. IRS and state guides help, but errors do still happen. A payroll provider can save money, time, and improve accuracy. Many providers offer flexible, add on services tailored to your needs. Outsourcing payroll can save small businesses money versus handling it in house. You can use this matrix to help you decide what's the best solution for your business. It reduces hidden costs like software, staff, time, error and penalties. Providers streamline processes and help ensure tax compliance. Outsourcing frees up time for owners to focus on business growth. Today you've learned the top 10 most common payroll mistakes, three key actions to overcome them, and how to use a decision matrix to determine what's right for your business. From our perspective, Outsourcing payroll can help you: Save time Avoid costly mistakes Enhance data security stay in compliance, access expert support, and integrate payroll and benefits data. I hope through all of this I've made you curious about what we do. Paychex can help you simplify payroll and make it accurate and on time every time. Paychex Flex can help you reduce payroll errors and the risk of potential fines, automatically calculate and send payroll tax taxes to help keep businesses compliant and on time It includes new hire paperwork to ensure that employees are classified correctly and that all new hire paperwork is completed and processed. As a business owner or manager, your focus should be on what you do best, your company product or service, and your clients. Let us help you with payroll so you can stay focused on where your business needs you the most. We've got one last quick poll for you, and it will pop up on your screen. If you'd like to speak with a paycheck sales professional about how we can support your business, click yes to the poll, and one of our team members will reach out to you within the next business day. Thank you again for your time today reviewing top 10 payroll errors and how to prevent them.