Why You Need Small Business Payroll Service

What are the common mistakes happen during payroll process?

A smooth payroll process in your organization is like oxygen—when it’s there, you hardly notice it; when it’s missing, you can’t think about anything else. That makes payroll one of the least appreciated yet most important functions within a business. Payroll, when done well, can keep employees satisfied and help your organization stay safe from legal consequences. On the other hand, when payroll mistakes crop up, their impact can ripple across an entire company.

Fortunately, all of the most common payroll errors are easily avoidable with education, proper planning, and the right tools. To learn about these payroll mistakes and how to avoid or fix them, read on.

Most Common Payroll Mistakes

With a process as complex as payroll, there are numerous places where organizations can make mistakes. Here are some of the most common payroll errors to watch for in your company.

Misclassifying Employees

The Fair Labor Standards Act (FLSA) provides benefits and protections, like overtime pay and minimum wage, for most employees under the law. Independent contractors, however, are not afforded these same protections. Likewise, exempt and nonexempt employees also have different legal rights. Some organizations slip up and misclassify their employees as independent contractors or as exempt.

Not only can misclassification deny an employee some important benefits and wages, it may also mean the government misses out on valuable tax dollars. If left unchecked, the resulting underpayment or overpayment can turn into a costly payroll error.

Miscalculating Pay

With overtime, commissions, deductions, PTO, and more, payroll admins have a lot to keep track of when it comes to calculating pay. For overtime wages, the general rule is 1.5 times an employee’s regular wage for any time worked beyond 40 hours in a workweek. However, your state may have different policies regarding overtime; your organization should always comply with the law that is more generous for the employee.

Poor time tracking capabilities can also contribute to miscalculated pay. If your company doesn’t have a reliable way to track employee hours or paid time off, then your chances of making a payroll overpayment or underpayment mistake skyrocket. Mistakes like these will result in a payroll correction.

What is a Payroll Correction?

A payroll correction is required when adjustments need to be made to amounts paid. Poor payroll organization, like forgetting to account for vacation days, can cause the need for money to be added or subtracted from the original amount.

How Long Does a Company Have to Fix a Payroll Error?

While legal time frames differ depending on the state, the short answer is that errors should be paid promptly. Fixing shortages in payroll as soon as possible should help you avoid any penalties. Labor laws require full payment for work completed and most companies will either add the missing pay to the next pay period or cut a check between pay periods.

 

Poor record keeping and data entry.

Mismatching names and Social Security numbers is so common that the Social Security Administration has even established a special verification phone number. Numerous data entry mistakes, including poor records of employee hours, cost companies millions of dollars annually and can result in government penalties.

Not properly handling garnishments, levies, or child support. Employees may owe money by way of a court order to other parties. This means whoever is handling payroll will be responsible for sending the payment to the appropriate recipient.

 

Ignoring the Importance of Mobile Security

Like computer security, mobile security is also vital to protecting your data. Have a clear policy set for mobile access that lets employees know what information and which applications are okay to share and access on their mobile devices.

Putting Off Installing Anti-Virus Software

You can also protect important online data by installing anti-virus software. Common anti-virus software, such as Norton or McAfee, should be installed on all company computers (Quickbooks). Additionally, procedures should be put in place to make sure this software is always up to date.

 

Bad bookkeeping

You have to integrate payroll into your books. After all, it has a direct impact on your cash flow. Knowing how much money you have available at any given time tells you how much you can invest in your business and your employees. Don’t want to deal with it? Get a good bookkeeper or hire an accountant.

We hope this helps you dodge any major payroll problems that might come your way. For state-specific guidance, visit your state labor office’s website.

Falling behind on tax payments and filings

Again, taxes. Depending on the amount of payroll taxes you collect, your tax deposits may be due monthly (most common), biweekly, or even the next day. If your state or city collects income taxes too, check with them to confirm due dates. Late payments may come with penalties and accrue interest, so follow submission guidelines and get your payments in on time!

Also, make sure you plan ahead and register your business well before taxes are due. Get federal, state, and local payroll tax identification numbers, as applicable, so you can pay the government and submit filings on time.

 

Administrative Staff

Many businesses, especially smaller ones, still carry out their payroll process in-house and manually. Often, the payroll staff is overworked. A manual payroll system typically requires a great deal of paperwork and a manual process also creates an administrative burden for your HR staff. Errors in data entry, for example, can create payment issues and the misapplication of rules. Being understaffed leads to mistakes.

Payroll Documents

A common problem is one of simply keeping all of your important payroll and employee records and information organized in an effective and accurate manner. Sometimes it is simply a matter of work flow: not keeping files and documents in a central location or creating uniform filing processes. A typical issue is storing and organizing paper checks, for example.

Use Tax Planning To Set Your Company Tax

The Importance of Tax Planning During the Year

What is Tax Planning?

Tax planning is a way to find out how much money you are paying on tax and also a way to help minimise the tax liability (the amount owed to tax authorities) through the use of allowances, deductions, exclusions and exemptions. Tax planning can be used in a number of ways; for example for retirement, businesses, Wills, and properties.

Types of Tax Planning

There are a few different types of tax planning that are useful for individual people, companies and organisations. Some of the tax plans include; short term tax plans, long term tax plans, permissive tax plans and purposive tax plans. The short term planning allows you to reduce taxes at the end of the income year. Long term plans allow you to plan at the end of the beginning or end of the year, permissive tax plans are permissible under different law provisions. The purposive tax plan gives you the chance to make different investments.

How It Works

When you start tax planning, you can find many guides online and you can also speak to financial advisors and solicitors to help get you started and give you all the important information that you will need to know. For example, each person has an inheritance tax allowance up to £325,000 with anything over the threshold being charged at 40%. So, if an estate was valued at £400,000, only £75,000 of that would be taxed. Since the majority of people won’t leave an estate over this amount, most feel they don’t need to know about inheritance tax. However, actively considering it and your future can help you to avoid any nasty surprises later on.

Taking tax-efficient decisions

There’s more to tax than investments. It affects every single aspect of your life—from salaries and income sources to expenditure to financial decisions. And this is a key aspect of tax planning—it helps you make decisions that lower your tax burden.

For example, let’s say you have to choose between two investment options. A tax planner helps you choose the best option while keeping in mind both returns as well as tax efficiency. Another example is ensuring your income is structured in the most tax-efficient way.

Tax audit and filing

The last key aspect of tax planning is the actual tax filing. This is when you take into account all aspects of your finance—income, expenses, debt, and investments—and then calculate your tax liability. Then, there’s all paperwork and documentation involved in paying your tax and filling your tax returns.

What makes tax planning important

Taxes are one of life’s certainties, and no one likes giving up some of their hard-earned cash. With proper tax preparation, however, it’s possible to pay less in taxes or receive a larger refund at the end of the year. While paying taxes is inevitable, there are several ways to diminish your tax burden and end each year with more money. Proper tax planning makes it easier to build your personal finances and afford the things you want.

Additionally, by anticipating taxes when you create your financial plan, it’s possible to significantly boost how much money you will have in retirement. Many elements of tax planning are quite simple, but it’s always worth speaking with a professional at a local bank who can offer additional guidance on how to successfully work within the tax system.

A tool for retirement

Saving for retirement is difficult under any circumstances, and it can be even harder to set money aside after taxes. Luckily, many retirement savings options allow you to set money aside without paying taxes on that income. Once that money has been placed in a separate account, it can gain value based on interest or investments. You will not be charged taxes on that money until you remove it from the retirement account. By that time, it’s likely you’ll be in a lower tax bracket and need to pay significantly less, according

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Take a long-term approach

Tax planning offers short and long-term benefits, but you’ll want to take a long view of your financial situation to maximize savings. If you anticipate an increase or decline in your income during the next few years, start catering your financial plan to the upcoming shifts ahead of time, according to CNBC. Figure out if it’s best to pay taxes on that increased income right now, or if you should try and put it all into tax-deferred accounts that may incur taxes later on.

Consider every part of your financial life

Taxes affect so many parts of your life that you may forget different ways to save. If you fail to consider the tax implications of a big financial decision, you could end up wasting a lot of money. The tax laws surrounding home sales can be particularly painful for uninformed buyers and sellers,  For example, people can get an exemption on capital gains taxes on a home sale if they file jointly with a spouse.

This can result in massive savings for couples, but far too many people fail to consider this factor when they list their home. By speaking with a financial professional before taking any financial action, you can prevent yourself from accidentally missing out on significant tax exemptions.

Go itemized or standard

Whenever you file your taxes, you have the option between taking the standard deduction given to all filers or creating a custom deduction by listing your expenses for the year. Either option can offer better savings, depending on your financial situation, so you’ll want to evaluate exactly how your financial life changed during the past 12 months. With proper tax planning, you can make your financial life much easier and pocket additional money along the way.

Objectives of Tax Planning

Minimal Litigation: There is always friction between the collector and the payer of tax. In such a situation, it is important that the compliance regarding tax payment is followed and used properly so that friction is minimum.

Productivity: Among the most important objectives of tax planning is channelization of taxable income to various investment plans.

Reduction of Tax Liability: As a tax payer, you can save the maximum amount from payable tax amount by using a proper arrangement of your enterprise working as per the required laws.

Healthy Growth of Economy: The growth in an economy depends largely upon the growth of its citizens. Tax planning estimates generation of white money that is in free flow.

Economic Stability: Stability is supplemented when the tax planning behind a business is proper.

How to get tax planning right

It is easy to get DIY tax planning wrong, especially with the regulatory goalposts changing all the time. Expatriates have the added complication of having to deal with the tax rules of more than one country at a time when global tax scrutiny is at its highest. Getting it wrong can not only lead to an unwelcome and unexpected tax bill for you or your heirs, you could end up facing a tax investigation.

It is important to make sure your tax planning is not done in isolation or as an afterthought – it should be a fundamental part of your investment, pensions, estate planning and overall wealth management approach. Be sure to schedule regular reviews so you can adjust your arrangements to keep up with any life changes or tax reforms that may affect you, including new opportunities.

For the best results, talk to an adviser with in-depth understanding of cross-border taxation, including how the local tax regime interacts with UK rules. As well as offering peace of mind that your tax and wider financial planning is compliant in your country of residence, they can ensure it meets your income needs and goals in the most tax-efficient way today, without burdening your family with unnecessary tax headaches in the future.