The company’s payroll is considered to be one of the most important things in the organization. That is because it contains information about everything the company has to spend money on.
Bookkeepers and accountants are still human, which means that they can make mistakes from time to time. For instance, they might deem gift cards given to certain employees as cash payment entries. Or perhaps, they do not employ a good system for easy reimbursement for the taxes that are filed when an employee is overpaid.
Whatever the case may be, the company payroll may be filled with some mistakes. For this purpose, you always want to make sure that you get payroll accounting services in Malaysia.
This article will be centered around the most common payroll mistakes that every bookkeeper or accountant is making.
Classifying Employees as Independent Contractors
Proper classification of your workforce is crucial. There are some that might work as independent contractors while others might be working as full-time employees.
Classifying them the right way is important because it will affect the tax forms that you need to file come tax time. Different forms such as the W-2 Form and the 1099 form are required by the companies to fill up depending on the workers that are in the company.
It is important that you classify your workers well because you might be withholding taxes for the wrong worker.
Failure to Issue Form 1099 Correctly
If you are hiring independent contractors and the payment for their services amounts to over $600, then you will need to file form 1099. If you fail to file this particular form, the IRS will impose steep penalties, which is something that you do not want to happen.
Not Including Reimbursements for Expenses from Reportable Wages and Doing It Incorrectly
There is a right way of excluding reimbursements for expenses based upon a preset accountable plan where company expenses are reimbursed only if there is a connection to your business. If there is none, the reimbursements should be included in taxable wages.
Not Depositing Withheld Taxes in a Timely Manner
There are certain withheld taxes that can be deposited either on a semi-weekly or a per-month basis. However, there are also some that would require a deposit immediately the day after it was imposed.
If you fail to deposit the required amount of money, you could be paying heavy penalties and you might even be imposed with interest charges ranging from 2-15 percent.
Not Including Commuting and Travel Expenses from Employee Income
In most cases, the travel and commuting expenses are usually not considered as taxable income for an employee. However, there are some cases where such expenses, especially those that are done for the completion of short-term assignments, can be subject to income tax and must be reported correctly.
Excluding the Fair Market Value of Gift Cards, Awards, and Prices in Employee Income Totals
Gift cards and prizes can be considered as cash and should be stipulated in taxable wages. Awards can also be considered taxable fringe benefits as well.
Trying to Do It Alone
Managing the business payroll is hard in and of itself and doing it alone could provide to be a very stressful endeavor.