Academic journal article Journal of Accountancy

Prevent Payroll Errors

Academic journal article Journal of Accountancy

Prevent Payroll Errors

Article excerpt


Payroll mistakes can be costly. Laws taking effect this year, including the Paycheck Fairness Act and Working Families Flexibility Act, and initiatives such as the IRS' National Research Program and OSHA's recordkeeping National Emphasis Program, can result in fines and penalties for errors or noncompliance. The following tips can help your clients avoid common payroll mistakes:

[check] Apply the latest laws and regulations. Failure to implement federal and state payroll laws can put business owners at risk for over- or underwithholding income tax, underpaying state unemployment taxes, erroneously ceasing child support withholding, or incorrectly calculating fringe benefits.

[check] Don't miss a deposit deadline. Deposit requirements are based on the total taxes reported on Form 941 from a four-quarter, look-back period. Clients must make all deposits on time to avoid penalties. The cost of outsourcing payroll to protect against this may be less than the penalty for one missed deposit.

[check] Process wage garnishments correctly. Employers are responsible for tracking and prioritizing employee wage attachments (for example, garnishments, levies and child support orders) to ensure that withholding and remittances are deducted correctly The U.S. Department of Labor provides information on who is covered, recordkeeping and reporting, compliance assistance, and other information at

[check] Don't put too much reliance on payroll software. Advise clients to periodically audit their payroll process to ensure employee pay and deductions are being entered correctly Advise clients to download tax tables from the IRS Web site and spot-check employee deductions. IRS Circular E has the latest tables, along with all the rules and guidelines employers must follow, available at

[check] Classify nonexempt employees correctly. …

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