07 Nov 5 Payroll Questions You Forgot to Ask (and Probably Should)
There are a few common mistakes that employers are making when it comes to payroll. This could result in an unwanted visit from the IRS and state authorities. Here are 5 questions that if employers started asking and paying more attention to, it could save them a lot of time and headache in the long run.
- Independent Contractor or Employee? – If you ever incorrectly classify an employee as an independent contractor, or the other way around, you could be making a costly mistake. This classification determines how the worker is paid, benefits enrollment, and the withholding of certain taxes. The IRS offers a guide which details the proper determination specifications for answering this question.
- Are Gift Cards and Other Fringe Benefits Taxable? – Yes! Most prizes and other awards such as gift cards, are considered taxable for federal income tax purposes. Other fringe benefits that are considered taxable include spousal travel, company-provided vehicles, and housing benefits. But you should note that come items can be excluded if they are considered “de minimis” or gifts that are so small that it would be unreasonable to include for accounting purposes. Because gift cards are considered cash, they should always be included in taxable wages. Here are more detail online about gift cards.
- When Should I Make Payroll Deposits, and what is the Penalty after Failing to Make Timely Payments or Deposits? – As a general rule, most companies are required to deposit payroll taxes on a monthly or semi-weekly schedule based on the “look back period” (the twelve-month period ending on June 30). Significant penalties and interest can result from failing to make deposits on time. For more information on how to determine what exact deposit schedule applies to your company, here’s a resource .
- Is it Really Necessary For Me to Display Wage Posters? – Yes! Believe it or not, if you do not securely hang a poster publicizing the federal minimum wage and overtime pay standards where every employee will be able to see it on a daily bases, you could be fined up to $10,000 and/or get jail time for up to six months. This is an easy way to avoid a serious headache.
- What Happens if I Neglect to File Form 1099? – For all services provided of $600 or more, Form 1099 must be reported to the IRS and issued to vendors during the year. Consequences will result if you fail to file the forms by the deadline. You can download the Employer’s Tax Guide here (Publication 15, Circular E) from the IRS website for details about important payroll tax deadlines, filing requirements, and penalties.
For information on how to streamline your payroll processes through your ERP software solution, contact us today!