The Payroll Blog

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Commonly Overlooked Payroll Mistakes

Posted On
Chris Bibey

With the growth of online payroll services, it is easier than ever for small businesses to avoid mistakes. Even though you may have the best technology in place, it doesn’t mean you are completely out of the woods. Regardless of your company size or industry, there are steps you must take to avoid mistakes and ensure that your payroll is 100 percent accurate.

Here are three commonly overlooked payroll mistakes that have led to trouble for many companies in the past:

  1. Forgetting about bonuses. This is a particularly common mistake during the holiday season with many companies paying employees a Christmas bonus. There is nothing wrong with giving a worker extra money, but it must be run through payroll just the same as other wages.
  2. Employee or independent contractor? It is your responsibility as a company to determine if a person is an employee or independent contractor. If you don't think this is important, you may want to reconsider.

The IRS has many rules in place to determine if a worker is a 1099 contractor or W-2 employee. Additionally, this will impact how the person is paid.

For more information and advice, check out this page on the IRS website entitled "Independent Contractor (Self-Employed) or Employee?"

If you inaccurately classify a worker and the IRS finds out, you can be rest assured that it will lead to many headaches.

  1. Neglecting to pay attention to your new hire checklist. There is a lot to consider when it comes time to "onboard" a new employee. If you don't have a new hire checklist in place, complete with payroll considerations, you are making a mistake. We published this page for companies that need help in this area.

Some payroll mistakes are easy to point out, while others seem to lurk in the shadows and sneak up on you at the worst time. Make sure you never fall prey to one of the three mistakes detailed above.