The Three Most Common Payroll Tax Mistakes

Posted by Bruce Mc on Jul 20, 2010 in Accounting, Bookeeping, Payroll service | 0 comments

There is no doubt that the laws surrounding payroll and payroll tax submission are difficult to master, even for the tax accounting professional.

Simple attention to the details can often reduce the risk of missing a tax payment, or making an incorrect deposit. Below are three common mistakes that can typically be avoided easily:

1. Submitting Deposits Late – Once you have withheld taxes from the employee, it is important to know when and how these taxes, along with the employer contributions, must be paid.  There are many regulations at the Federal and State levels that dictate when and how payments are to be remitted.  If payments are late, penalties and interest can be assessed. Contact your accountant, bookkeeper or payroll vendor to find out your payment obligations. 
2. Late or Incorrect Payroll Tax Return Filings – There are numerous Federal and State returns that must be filed for payroll taxes, including withholding, unemployment, local and school district taxes.  All have different reporting requirements (paper, e-file, mag media, etc.) and due dates.  If proper procedures are not followed, penalties and interest can be assessed.
3. State Unemployment Insurance Rates not Updated -Most States update employer SUI rates annually.  It is important to update the payroll software with the new rates, so taxes are properly paid.  Underpayment of taxes can result in penalties and interest. Once again, contact your CPA, accountant, bookkeeper or payroll vendor for this information.

Avoid the Obligations Altogether – Outsource it.

Most small employers recognize they are unable to stay abreast of all their payroll tax obligations. Many outsource payroll to a payroll vendor.  The vender deals with preparing the payroll and tax obligations for the client. IRS audits, payments and inquiries are directed to the payroll vender, which has teams of payroll and tax specialists on staff.

While the concept may sound foreign at first, thousands of employers have found that a payroll provider is precisely the cure to the payroll tax headaches they have been looking for.

Learn more about Payroll Tax services here.

Consider the following statistics:

• The tax code (the basic law written by Congress) is 2,840 pages.
• The IRS regulations add an additional 46,000 pages.
• The combined number of forms for businesses and individuals is now over 480

Internal Revenue Code (IRC) 6656 reviews penalties for late payments of payroll deposits. A deposit only ONE day late will result in a penalty equal to 2% of the delinquent amounts. It jumps to 5% for payments made 6 days late, and doubles to 10% for payments made 16 or more days late. A recent report states that over 1 MILLION tax penalty statements are sent out quarterly.