Payroll accounts are an essential task of the payroll department in any organization. It may seem like an easy task to prepare payroll accounts, but in reality, there are a lot of aspects to cover and be careful with. In addition to that, there are certain payroll laws imposed by the state and federal laws, which require compliance. Properly dealing with these tasks is very critical and can either lead your business towards success or down on its knees.
There are many common mistakes that are made while preparing payroll accounts, and also make possible ways to avoid such mistakes. To help you better understand the possible mistakes in payroll accounts. Here is a list of 5 payroll accounting mistakes you can avoid in your organization:
1. Classifying employees and workers
Organizations hire people on two terms; sub-contractors and permanent employees. Sub-contractors are not part of your payroll and permanent employees are. So, it is important to make sure of the difference between the two. Sub-contractors report their tax deductions directly to CRA.
While employee classification, employers must make separate lists and don’t make the mistake of mixing. This would create further confusion which wouldn’t be to your advantage.
2. Miscalculations of wages and overtime wages
Miscalculations of wages and overtime wages are among the most common mistakes in payroll accounting. Although the calculations are standard, it requires many aspects to consider and the order of calculation is important too.
There are standard laws regarding overtime wages, and it’s completely different from standard employee wage laws. So one can easily make a mistake calculating overtime wage, if unaware of the overtime threshold. There are many available online payroll webinars to help and assist your team to stay updated on these terms and laws.
3. Pay the wrong tax
Taxes are complicated and time-consuming. Payroll departments more than often make mistakes in filing wrong taxes, which are gladly later highlighted through internal audits.
Remember that tax rates fluctuate often depending on the economic situation and thus it’s the payroll department’s job to stay updated and in compliance, making sure they are not paying the wrong tax amounts.
4. Not meeting the deadlines
Another important payroll task is to keep check of deadlines and meet the deadlines. In most organizations, payroll departments wait till the last dates to submit their tax returns and other payroll applications, which would later give them little or no time to correct the mistakes if they have any. This creates a big loss to the organization, as it would later lead to heavy penalties.
5. Do not conduct internal audits
Employees will make mistakes and that’s unavoidable. Even professionals can make mistakes. The only way to correct a mistake is to bring a fresh pair of eyes and minds to audit the accounts that have been prepared. Internal audits can catch many red flags in payroll reports that could be corrected before it reaches the hand of the IRS.
The payroll department needs to avoid many pitfalls to successfully execute and prepare an accurate payroll account. Though it’s not an easy task, keeping the points above in mind can definitely help you overcome some of these possible errors.