The 2 Biggest Payroll Risks Employers Face and How to Avoid Them|
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Schedule a meeting with Aprio People Advisory Services to learn more about how you can avoid costly payroll risks.
The full story:
As a business owner, you face unexpected risks that you can’t necessarily predict or even prepare for, such as a global pandemic that causes worldwide shutdowns. But you also face inherent risks in your regular operations, workflows and processes — like payroll.
Here are the two biggest payroll risks you face and how to avoid them:
1. Failure to pay your employees properly
This is one of the most grave and costly risks your business faces. Here’s why: Imagine that you’re a business with an office in Atlanta, and you pay your employees once monthly. You decide to hire a specialist in Kentucky to help fill a critical position. Given the ease and convenience of today’s remote work environment, you assume you can onboard this employee to your normal processes and add them to your monthly payroll seamlessly.
Though this plan sounds great in practicality, it’s actually laden with issues, because the state of Kentucky has a law that requires employers to pay their people twice per month. By simply onboarding this employee on to your standard payroll process, you have broken a state law that comes with significant penalties. If you do not understand multistate payroll compliance requirements, then you must work with an expert who is well-versed in applicable laws and required municipal regulations, so that you can pay your employees properly and within compliance.
2. Failure to pay taxes
Many taxpayers worry about the IRS knocking on their door to report a tax mistake; tax law is complex, and it’s normal to feel some degree of anxiety since penalties can often be hefty. But one way you can avoid unexpected IRS visits is by making sure your payroll system and process are airtight.
Let’s say you have a payroll system that has worked well for years, but you do not have experts running it behind the scenes. You may have established processes when you hired your first employee and haven’t had time to revisit them. You may assume that you’re making automatic tax payments to the government, but you don’t have time to reconcile your books quarterly or monitor cash flow as closely as you would like.
The next thing you know, you receive a notice stating that you haven’t paid any prior-year payroll taxes.
This happens to countless business owners, particularly those who have small teams and are already pressed for time. Unfortunately, you can be held criminally liable for large underpayment penalties, especially those that extend multiple years. You need to hire dedicated specialists or experts to run your payroll system and process to ensure your accrued taxes are paid on time.
The bottom line
Multistate and payroll tax compliance requirements can be complicated, but it is paramount that you understand and adhere to them to avoid risks.
- The Top 11 Payroll Pain Points and How to Solve Them: Part I
- The Top 11 Payroll Pain Points and How to Solve Them: Part II
- The Top 11 Payroll Pain Points and How to Solve Them: Part III
If you need expert assistance to manage your payroll tax liability and obligations, work with Aprio’s People Advisory Services team. We’ll help you navigate federal, state and international tax compliance requirements so you can hire, onboard and pay the best people for the job — no matter where they are.