As a forward-thinking employer, payroll is an area you cannot afford to get wrong when dealing with your employees. A single payroll mistake can cost your business a lot of resources and can result in personal penalties for you. Educate yourself about these five common errors so as to avoid these costly consequences.
Wrong Classification of Employees – Are They Independent Contractors or Employees?
Workers are either independent contractors or in-house employees. Getting the distinction between these two groups of employees is quite important since you are required to report the salary you pay your employees under each of these categories differently to the IRS.
Benefits such as medical insurance are a major distinction between these two groups. If you misclassify your employees, this error can have a significant bearing on the employee’s status and the taxes that should be withheld. You might be required to pay penalties amounting to 10 percent of whatever employment tax liability should have been remitted in the previous tax years.
But you have a way out if you if you learn that you have made this mistake. Rectify this as soon as possible to avoid paying these hefty penalties. The key is to ensure that you maintain payroll compliance at all times.