When it comes to writing about the various parts of how to financially run your business in this space, the bit I talk about the least is probably payroll. This is most likely because it is an area that seems almost of the “set it and forget it” variety. Even if you pay hourly employees, once their payroll profile is correctly established, paying them is often a matter of plugging in the correct hours and letting a payroll service take care of the rest.
This might be illogical, though, for how little front-of-mind space payroll takes up is in opposition to how important it is to make sure that employees are paid. And one needs to realize how critical it is when people are not paid correctly.
In a recent article posted on cpapracticeadvisor.com, it was found that, “nearly half of American workers will seek new employment after just two payroll mistakes, such as being paid late or incorrectly.” This number seems high on first look, but why would people stick around if they are not being paid correctly? Even the employees who are most committed to a company’s vision and purpose are not ONLY working for that. On some level, everyone is working to be compensated, and for many that occupies the highest level.
After all, the same article says that only seven percent of employees will not report the error at all. So if people are not being paid correctly, that is a lot of angst and complaints that must be dealt with.
I also recently read an article on Forbes.com that caught my eye with the headline “Worst Taxes? Paying Someone Else’s.” Even as someone who spends a large amount of time thinking about and researching tax issues, I was not immediately sure what that could be referring to.
Well, it turns out that author Robert W. Wood looked at “responsible persons” who could be held liable if an employer did not pay all their payroll taxes. Now don’t freak out if you’re an employee who has no idea how your employee handles those responsibilities. First, reputable payroll providers withhold the money for those payments automatically so that they are paid with every payroll run. Second, “responsible persons” only includes officers, directors, and anyone who makes decisions about who to pay or can sign checks.
But yes, although this does not include most regular employees, it does allow for some people to be held responsible who may not have had any idea about the infractions. And then, although no one ever really wants to pay taxes, I do have to agree that paying those very much could be the worst kind.
What these two articles speak to overall is that payroll can be dangerous when handled wrong. And although it is not an area that tends to draw much attention, you do want to spend enough time on it to ensure that it is being handled correctly, and get the peace of mind that comes with that. So if you have any questions about how you are handling your payroll or the tax obligations that go with it, please let us help.
To ensure we don't make the folks at the IRS ornery, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.