Payroll Precision: Avoiding Common Errors as Tax Deadlines Approach
As the end of the tax year draws near, businesses must focus on finalizing their payroll processes to ensure smooth and accurate tax filings. With tax deadlines fast approaching, it’s crucial to avoid common payroll errors that could lead to costly penalties or delays in filing. Here’s your timely guide to ensuring payroll precision as tax deadlines approach:
- Double-Check Employee Data
Accurate employee information is the foundation of error-free payroll. Ensure that all employee records are up-to-date, including names, addresses, Social Security numbers, and tax filing status. Inaccurate or outdated information could cause discrepancies in tax filings and lead to potential IRS penalties.
Pro Tip: Regularly verify that employees have completed and updated their W-4 forms, particularly if they’ve experienced major life changes such as marriage, new dependents, or changes in income.
- Accurate Wage Calculations
Make sure that all wages and compensation are correctly calculated. This includes hourly wages, overtime pay, bonuses, commissions, and any other forms of compensation. Failing to properly calculate wages can lead to tax inaccuracies and over-or under-withholding.
Pro Tip: The use of automated systems to track hours worked reduces the chances of human error in wage calculations.
- Proper Tax Withholding
Tax withholding is one of the most critical aspects of payroll. Be sure that you’re withholding the correct amount for federal, state, and local taxes based on each employee’s W-4 form and tax status. Miscalculations here can result in significant penalties or overpayments that employees might later struggle to recover.
Pro Tip: Regularly conduct a payroll audit to ensure that employees’ tax withholding aligns with their current circumstances. Encouraging employees to review and update their W-4 forms annually or when significant life events occur can prevent over- or under-withholding throughout the year. This proactive approach helps to keep tax withholding accurate and in line with current tax laws.
- Ensure Timely Tax Deposits
Businesses are required to deposit payroll taxes on time. Late or missed deposits can result in severe penalties from the IRS. Be aware of your deposit schedule, whether it’s monthly, semi-weekly, or next-day, and ensure payments are made promptly.
Pro Tip: Set reminders for key deposit dates to eliminate the risk of missing important deposit deadlines, reducing the potential for penalties due to late payments.
- Review Year-End Forms (W-2, 1099, etc.)
As you approach tax filing deadlines, make sure you review all year-end forms, including W-2s, 1099s, and other tax documents, for accuracy. These forms must be sent to employees and contractors by the end of January, and they serve as the basis for tax reporting.
Pro Tip: Double-check the totals on these forms against your payroll records and ensure that any withheld amounts are properly reported. Misfiled or incomplete forms could delay tax filings for your employees and contractors.
- Classify Employees Correctly
It’s important to ensure that all employees are classified correctly as exempt or non-exempt, and that contractors are properly classified as 1099 workers. Misclassification can lead to tax issues, including penalties for not withholding the correct amount of taxes for non-exempt employees.
Pro Tip: Regularly audit your employee classifications to ensure compliance with IRS guidelines, especially if you’ve added new employees or contractors throughout the year.
- Retirement and Benefits Contributions
Contributions to retirement plans, health insurance, and other benefits must be accurately reflected in payroll records. If your business offers a 401(k) or other benefits, ensure that both employee and employer contributions are correctly deducted and submitted.
Pro Tip: Verify that contributions meet the IRS limits and ensure that they are properly reflected in both the employees’ paychecks and year-end tax forms.
- Prepare for Audits
Sometimes, businesses face payroll audits, either randomly or due to discrepancies in filings. Being proactive in checking your payroll records and ensuring they are aligned with tax filings can help you avoid issues down the line.
Pro Tip: Keep all payroll records well-organized and accessible in case you are audited. Detailed records and receipts make the process smoother and less stressful.
Conclusion
As tax deadlines loom, businesses must stay vigilant in reviewing and finalizing payroll to avoid errors. By ensuring accurate employee data, proper wage calculations, timely tax deposits, and correct year-end filings, you can reduce the risk of tax-related issues and penalties.
At Payentry, we offer comprehensive payroll services that are designed to help businesses avoid errors and stay compliant with ever-changing tax regulations. Contact us today to ensure your payroll process is precise and your tax filings are stress-free.
For the latest updates, to view our webinars, and listen to our podcasts, visit and follow us on LinkedIn, Facebook, X, Instagram, YouTube and Spotify.
Payentry personnel management professionals provide expert support in payroll, workforce management, human resources, benefits administration, and retirement planning services.
Learn more about how we can help you achieve your goals, address challenges, and resolve issues with speed and precision by conveniently scheduling an appointment with our team. And to speak directly with an experienced payroll professional, please contact us at 888.632.2940.
*Payentry, an MPAY Company (Company), is not a law firm. This article is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other Company materials does not create an attorney-client relationship. The Company is not responsible for any inadvertent errors that may occur in the publishing process.
