Payroll processing is a cumbersome but necessary part of operating your business. It includes many tasks such as issuing checks every pay period, comprehensive recordkeeping, making payroll tax deposits, and filing quarterly and annual returns. There are many simple – and tricky! – filing mistakes that can be costly and contribute to the endless details of payroll processing. In observance of National Payroll Week, let’s take a look at some of the ins and outs of processing your payroll. Payroll processing is a cumbersome but necessary part of operating your business. It includes many tasks such as issuing checks every pay period, comprehensive recordkeeping, making payroll tax deposits, and filing quarterly and annual returns. There are many simple – and tricky! – filing mistakes that can be costly and contribute to the endless details of payroll processing. In observance of National Payroll Week, let’s take a look at some of the ins and outs of processing your payroll.
Records
Processing payroll means that employers must collect and maintain personal information about their employees. In addition to their current staff members, employers also must retain records on former employees for a designated length of time. Employers must also keep relevant wage and tax information for the IRS, the U.S. Department of Labor, and numerous state, local, and other regulatory agencies that may require additional recordkeeping. These various government agencies enforce their own laws, and may need information involving unemployment insurance, wages and hours, child support, creditor garnishment, and unclaimed or abandoned wages.
Proper records are essential to compliance with regulatory requirements and protection against audits by federal, state, or local agencies. Improper recordkeeping can result in back taxes, interest, and penalties, not to mention susceptibility to identity theft. If you’ve been in business a while, you could have mountains of old personnel files in storage somewhere. Identity thieves know that businesses maintain these records long-term, and could make your business a susceptible target to these scammers. Whether current or old, paper or electronic, it’s time to take an objective look at your company’s data security to make sure that your records are safe from the threat of identity theft.
Security
The news is filled with stories about cybersecurity and online threats, identity thieves know that improperly stored physical records can be vulnerable targets for stealing personal data. When you consider your company’s security, are your personnel records kept in a locked office? If so, who has a key? Where are the old files kept? Records of former employees should never be put in a general storage area where prying eyes can see them. Make it a priority to find a storage place — perhaps a lockable closet — that can be secured with limited access. Here are some other tips to help prevent identity theft:
• Properly destroy files when you’re no longer required to keep them.
• Instruct staff members who handle sensitive documents (for example, copies of Social Security cards, driver’s licenses, and bank account numbers) to never leave them unguarded, such as on a desk, fax machine, copier, or on a computer screen that unauthorized individuals can see.
• Make sure that your lockable storage is secured when not in use.
In today’s environment, cybersecurity and online data theft seems to be at an all-time high. That’s why it’s critical to set stringent policies and review them with staff members regularly who have access to your computer systems. It may only take one hastily opened email message for your entire system to be compromised. Here are some other steps you can take.
• Check with your technology manager to make sure you have the right protections in place to secure your systems and keep those protections updated.
• Meet with your staff regularly to warn them about scams you’re aware of and remind them that new, seemingly legitimate threats pop up every day.
• Instruct your staff to never click links or open attachments in questionable messages, and to report any suspicious messages to a supervisor.
Why Outsourcing Makes Sense
While no system is foolproof, reputable companies that process payroll maintain a tight focus on information security, which is one reason why many businesses outsource this function. Here are just some of the security-related advantages of outsourcing payroll:
• Only necessary information is collected.
• Records (paper and electronic) are destroyed on a timely basis, once there is no longer a legal requirement to keep them, in accordance with the Fair and Accurate Records Retention Act.
• Access to employee information is strictly limited to those who need it.
• Data is encrypted.
• Systems are password protected, with verification processed to further limit access.
With payroll processing by Crippen & Co., you receive the advantages of protection and security while also freeing up time and resources that could be better spent elsewhere in your business. We can help your business operate more smoothly by:
• Processing your company’s payroll according to your pay schedule.
• Ensuring payroll deposits are made on a timely basis.
• Guaranteeing that your quarterly and year-end payroll reports are accurately prepared and filed to meet government deadlines.
• Monitoring all changes in payroll law to keep you in compliance and help avoid costly penalties.
You also avoid costly filing errors or compliance with government regulations that are cumbersome and time-consuming. With the competitive pressures your business faces today, it’s easy for an executive to neglect to sign a Form 940 or 941 or make a simple math error. Unfortunately, the IRS doesn’t care about your competitive environment. If you fail to properly file forms and make the required tax deposits, it can lead to substantial interest and penalty payments. These payments are a waste of money.
Another complicated area of payroll processing is W-4 forms. Does the employee filling out the form qualify for federal withholding exemption, or did they fill out their W-4 form improperly? Either scenario can create a headache for your business if not handled accordingly, and provides multiple reasons why outsourcing your payroll needs is a smart decision.
When helping employees fill out W-4 forms and questions arise regarding the federal withholding exemption, here are some points to keep in mind.
• Did the employee have a tax liability in the previous year? If he or she received a refund of all federal income tax paid (or had a right to a refund), the employee had no liability and can claim to be exempt.
• Does the employee expect to have a tax liability this year or expect to qualify for a refund of all federal income tax paid? To make this determination, the W-4 worksheet asks:
1. Can the employee be claimed on someone else’s income tax return this year (such as a parent)?
2. What level of income does the employee expect this year?
3. In addition to earned income, does the employee expect to receive more than $250 in unearned income (such as interest or dividends) this year?
Note: An “exempt” W-4 is only valid for one year. If your payroll includes employees who claim to be exempt, require them to see you every January to fill out new W-4s to reflect changes in their situations.
Previously, employers were required to send copies of questionable W-4s to the IRS for evaluation, however this requirement was dropped years ago. The IRS may still determine that an employee is under-withholding based on information reported on W-2s. If your employee is found to have a serious under-withholding problem, your payroll department may be contacted and instructed to withhold at a more appropriate rate.
You can avoid payroll issues with W-4 forms, and many other problems, by allowing us to provide payroll services to your business. Let us handle all the details while keeping you in compliance with payroll laws and regulations. You can leave your payroll hassles behind knowing that Crippen & Co. will professionally process your company’s payroll and file error-free payroll tax forms on time. By using our services, you can concentrate on running your business.