It’s no secret that employment laws are complex. Every year, rules and regulations around compliance change. Additionally, the IRS tax guide specific to employers and payroll is updated each year.
It’s a lot to assume that every business of every size will get payroll taxes right every time. The IRS estimates that around 40% are fined annually for not meeting payroll regulations between small and medium-sized businesses.
Often, these fines revolve around tax stipulations that business owners may not have been aware of in the first place. Sometimes they’re related to businesses failing to deposit withholdings. Other times, a company may deposit an inaccurate withholding amount. It’s also possible to receive a fine for general incorrect filing.
Why Do Businesses Struggle with Payroll Tax Fines?
At a glance, it may seem like payroll tax would be a straightforward concept. Unfortunately, the reality of the situation is much different.
Many small and medium-sized businesses utilize a manual payroll process. While this may seem like a cost-effective strategy initially, it leaves the door open for a multitude of calculation errors along the way.
Additionally, a manual approach frequently pairs with the fact that a business may be using multiple software platforms to perform payroll services. With so many factors at play, it becomes a bit easier to see why IRS penalties can become commonplace.
What Needs to Change?
Owning a business isn’t an easy task. It’s an undertaking that requires incredible attention to detail and impeccable planning regarding payroll taxes.
It’s fair to say that business owners face a plethora of day-to-day challenges. Attempting to manually, not to mention accurately, process payroll in the midst of it all is typically not realistic.
Instead, those looking to avoid payroll mistakes that lead to costly IRS penalties should consider integrated payroll services. The following are five ways payroll services can help a business prevent those unpleasant fines.
Payroll Services Keep Up with the Changing Rules and Regulations for You
Taxes are tricky. Making them even more challenging is the fact that the associated rules and regulations change frequently.
Business owners attempting to process payroll manually often find it nearly impossible to stay ahead of fluctuating tax requirements. The difference between a successful filing and a fine often lies in the fine print. Unfortunately, updated regulations tend to be overlooked, with so much else demanding a business owner’s attention.
Investing in payroll services takes the stress out of keeping up with these changes. Having a tax and accounting professional take responsibility for ever-changing rules guarantees nothing goes overlooked.
Payroll Services Ensure Employee Hiring Records are Accurate
A big part of avoiding IRS penalties when it comes to payroll is ensuring that employee hiring records are available, completed, and accurate. Investing in third-party payroll services turns the bulk of that work over to the professionals.
Hiring a great employee is only step one. From here, an employee will need to fill out tax information accurately and completely.
Typically forms I-9 and the W-4 need to be on file with a business. Payroll services will make sure that W-4 forms are updated annually so a company remains tax compliant. In addition to these forms, every employee’s social security number must be filed and verified, as well.
Payroll Services Can Verify the Accuracy of Employee Payment Records
IRS penalties can come into play when businesses fail to report accurate employee payment records. Often, this isn’t done intentionally but is the result of a manual miscalculation.
Avoiding this type of mistake is made simple when payroll services become an integral part of a company’s operating standards. Professional accountants take time to verify employee payments and payment records within payroll services before taxes are ever filed.
Payroll Services Ensure Workers are Properly Classified
One of the most commonly overlooked tax specifications leading to IRS penalties is a worker’s classification question. Employers have options to identify workers as employees, independent contractors, statutory employees, or statutory nonemployees. Each classification is based on different requirements and changes the associated tax regulations.
A business owner attempting to handle payroll manually could spend endless hours trying to decipher classifications. Alternatively, outsourced payroll services can take care of that process for you.
Payroll services professionals understand the specifications of each classification. They’re readily available to verify that employee records reflect the correct classification status. They’ll also handle the details regarding different withholding standards for each worker classification when it’s time to file.
Payroll Services Can Streamline the Process Through Automation
When you eliminate manual processing from payroll, there’s a good chance that a business will no longer be at the receiving end of IRS penalties. Investing in payroll services often comes with the expectation of automated options.
Anytime a business can automate payroll, everyone wins. Employees get paid on time, business owners save on time, and taxes get filed accurately.
Payroll software is refreshingly efficient and eliminates common calculation errors. You can program automated services to utilize only the most recent tax tables, instilling even more confidence in payroll accuracy.
Automated payrolls services also often include options to offer employees direct deposit of their paychecks. While this is convenient for employees, it’s also a more streamlined approach to record-keeping when you have to file salary reports for tax season.
Any way you look at it, automated services provide a significant benefit to businesses. They make record-keeping and payment processing simple. It’s an approach that simultaneously offers up an easier way to approach payroll taxes without stress about the penalties and fines.
Contact Windroot Today
There’s no reason to worry about inaccurate tax filings or hefty IRS fines when you partner with Windroot. Our team of professionals is here to streamline the process and provide a stress-free alternative instead.
Reach out today to learn more about our comprehensive suite of accounting services. Customers can also feel free to send their inquiries using our simple online form. We can’t wait to hear from you!
