Payroll compliance is easily the most misunderstood (and important) aspect of payroll.
Mess it up and you could be hit with harsh penalties. Have it down-pat? Nothing slows your operations down.
Here’s the issue…
Many small-to-medium sized businesses are still using archaic spreadsheets and manual processes to do payroll. In fact, statistics show that 40% of these businesses incur IRS fines due to improper payroll filing.
Talk about unnecessary expenses.
Desktop payroll software can change the way your business deals with payroll compliance forever. You can save time with desktop payroll software while protecting your business from costly penalties. Best of all…
Desktop software
- Saves you money
- Takes little effort to set-up
- Protects your business instantly
Before we jump into the specifics of payroll compliance let’s review:
- What Is Payroll Compliance?
- Why Desktop Payroll Software Is Useful
- Must-Have Features For Compliance
- Payroll Compliance Mistakes To Avoid
- Staying Compliant For The Long-Haul
What is Payroll Compliance?
Payroll compliance ensures your business is adhering to all federal, state and local laws when it comes to compensating employees.
This extends to withholding taxes, overtime calculations, minimum wage legislation, keeping accurate records and more. Every detail during payroll must be correct.
Pretty overwhelming? Yep.
But did you know that…
The majority of payroll compliance issues are tied to human error. Typos in tax codes, missed deadlines, and miscalculating overtime are just some of the mistakes that can invite IRS audits and penalties quicker than you think.
Desktop payroll software prevents human error by calculating everything for you. Forget buying new calculators or updating tax tables. Let the software do all of the grunt work by automating your payroll compliance!
Why Desktop Payroll Software Should Matter To Your Business
Desktop payroll solutions aren’t like their cloud-based competitors. Sure, they both accomplish the same thing at the end of the day but here are some key differences.
First of all, data control.
When you use desktop software, your information stays on your local computers. Your files contain sensitive employee data that you don’t want available online. By storing your information offline you aren’t subject to outside threats during processing.
Secondly, reliability.
Desktop applications don’t rely on an internet connection to function. Say what? Yes, you can run payroll without an internet connection which means no interruptions during outages or if you have poor service. Businesses that absolutely need payroll run every week will benefit from this.
Here’s one that most people don’t realize.
Desktop applications typically offer automatic compliance updates. This includes tax tables, regulation changes, and forms. Don’t worry about updating anything yourself. Your software does it all for you!
Need some proof? Here’s what the statistics say:
Businesses using automated payroll are 70% less likely to experience compliance issues than their competitors that do payroll manually.
Desktop payroll software wins again.
Key Features To Look For When it Comes To Compliance
Payroll software can vary from company-to-company. When searching for the right desktop payroll solution for your business, look for these must-have features.
Automatic Tax Calculations
Employees get paid different federal, state and in some cases local taxes withheld from each paycheck. Software should be able to calculate Social Security, Medicare, unemployment taxes, and more without you lifting a finger.
Automatic Form Creation
Payroll doesn’t just consist of employee checks, it also includes you having to generate specific forms. Look for desktop software that can create W-2s, 1099s, quarterly tax reports, and year-end summaries. Not only will it populate the forms with data, but they’ll be ready to print and meet IRS guidelines.
Audit Trails
If the IRS ever decides to audit you, you’ll want your payroll software to have audit trail capabilities. All transactions should be recorded and stored by your payroll software. Meaning, any calculations and payments can be tracked by specific date.
Calendar Notifications
It only takes missing one deadline to start racking up automatic fines. Use desktop payroll software with a calendar feature to set-up notifications for deadlines months in advance.
Payroll Compliance Mistakes Employers Make
Don’t think software can prevent these common payroll problems?
Misclassifying Employees
One of the biggest payroll problems is misclassifying employees. Whether they’re an independent contractor or an employee, taxes require very different handling. Risk being assessed back taxes as well as penalties by the IRS.
Incorrect Overtime Calculation
Employees who are non-exempt must be paid time-and-a-half for any hours over 40 hours per week. However, if that employee also receives bonuses or commission, overtime calculations can become more complex than you realize.
Recordkeeping
The IRS requires that you keep payroll records for min. of 3 years. Not having those records when requested will bite you later. Use desktop payroll software that stores everything for you.
Depositing Taxes Late
Did you know there are different schedules for depositing payroll taxes? The longer you wait to make that deposit, the larger penalty you’ll incur.
How To Avoid Payroll Compliance Issues
Payroll compliance is a moving target. What’s compliant today may not be compliant next year.
Update your software.
Just like you have to keep up with tax changes, so does your payroll software. Failing to update your software will leave gaps in your compliance. Set calendar reminders to ensure your software is up-to-date.
Audit yourself.
Running internal audits on your payroll department is one of the best ways to identify issues before they become huge problems. Review how taxes are calculated, how employees are classified, and if your keeping proper records quarterly.
Stay educated.
Anyone in your company that deals with payroll should know the basics of payroll compliance. They don’t need to be a tax expert but enough knowledge to recognize when there is a problem.
Seek outside help.
You can have all the software in the world but if you run into a complex payroll situation you may need outside assistance. Payroll professionals and CPA’s are great resources to have on your team.
Final Thoughts
Payroll compliance should be stressful.
Implementing a desktop payroll software solution will allow you to focus on tax calculations, automatic form generation, and keeping your records organized without going insane. Let automation remove the risk of human error while safely storing all of your sensitive data.
Remember…
- Software that automatically updates will save you from headaches down the road.
- Automatic form generation eliminates mistakes on W-2’s, 1099’s and quarterly filings.
- Keep proper records with your software’s audit trail feature.
- Calendar notifications are must to avoid penalties for late filings.
Businesses who “have their ducks in a row” with payroll are the ones utilizing desktop payroll software. Take your business back from the hassle of payroll compliance by setting-up desktop payroll software today.
Don’t let penalties scare you… let them motivate you to make a change.
You’ve got this!
