Many business owners feel that they can pay their employes “whenever” they want and that is true to a point. Business owners can pay their employees whenever they want as long as the “whenever” meets the laws of the state their business resides in.
As a business owner you probably feel “in control” when it comes to setting a payroll schedule for the people you hire. Certainly you have options, you can issue payroll on a:
- weekly
- bi-weekly {every other week}
- semi-monthly {twice a month, perhaps on the 1st and the 15th}
- or a monthly basis
While there is no federal laws that require how often you pay your employees, the payroll schedule you choose MUST conform to the requirements of the state that your business is located in.
Most states require that every employer has to pay all of the wages due to an employee on a regular payroll schedule, which is determined by you the business owner – BUT you must notify the employees of how frequently you intend to pay them. A “regular schedule” means that you must consistently pay your employees using whatever frequency you choose, in other words you can’t just randomly issue a payroll check.
Many states also tell a business owner how much of a “holdback” they can take. Meaning that if you decide your workweek starts on a Sunday and ends on a Saturday and that you will pay your employees on the Friday AFTER the end of the work week; you are holding back a week’s worth of pay.
A word of caution – a business can get into trouble if it doesn’t pay it’s employees as often as the law requires – and I’m sure you don’t want or need that additional headache! Believe it or not, but each state has their own set of rules and regulations {imagine that!}, in some states the rules are different depending upon the employees occupation. In other words, setting a payroll schedule that is realistic for your company AND that conforms to state requirements can be a mess!
The U.S. Department of Labor provides a fairly detailed overview of employee payroll schedules by state, you can find State Payday Requirements here, the information provided is ONLY an overview of general information – you should most definitely contact your state department of labor for all of the details!
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Figuring out which QuickBooks Payroll option is right for your business can be a pretty daunting task; especially with all of the payroll options that are now available.
We all know one thing – if you have employees, you have to pay them! That’s simple.
Determining which QuickBooks Payroll option is the right solution for your company is a different story though – let’s look at the options available:
Intuit Online Payroll – internet based and totally removed from your QuickBooks desktop company data file. It comes in two versions – Basic and Plus.
- Basic includes the ability to process an unlimited number of payrolls each month, includes free direct deposit or allows you to print checks and check stubs on your own printer – directly from the on-line system; electronic tax payments, quarterly and year-end tax filings – including W-2’s. Pricing starts at $25.00 per month for a single employee, additional employees at $1.50 each, and if you file taxes in more than one state, each additional state is $12.00 per month.
- Plus includes all of the above plus E-File & Pay is available for federal and most state forms and taxes. When E-File is not available in a state; signature ready forms or worksheets are available. Pricing starts at $39.00 per month for a single employee, additional employees at $1.50 each, and if you file taxes in more than one state, each additional state is $12.00 per month.
Basic Payroll – all of your payroll data lives in your QuickBooks file, which is extremely important if you want good job costing. It comes in two versions – Up to 3 employees and Unlimited Employees. Basic payroll does not provide the ability to generate quarterly and year-end tax filings – including W-2’s. You’ll either need to do these manually or work with an accountant or bookkeeper.
- Up to 3 employees allows you to create paychecks for up to 3 employees on a schedule of your choosing (weekly, bi-weekly, monthly, etc.) and provides instant access to the most current federal and state payroll tax updates. Current pricing is $129.00 per year and beginning August 23, 2010 it will be $124.00.
- Unlimited employees allows you to create paychecks for an unlimited amount of employees on a schedule of your choosing (weekly, bi-weekly, monthly, etc.) and provides instant access to the most current federal and state payroll tax updates. Current pricing is $229.00 and beginning August 23, 2010 it will be $249.00.
Enhanced Payroll – all of your payroll data lives in your QuickBooks file, which is extremely important if you want good job costing without duplicate data entry. It comes in two versions – Up to 3 employees and Unlimited Employees.
- Up to 3 employees allows you to create paycheck for up to 3 employees on a schedule of your choosing (weekly, bi-weekly, monthly, etc.), provides instant access to the most current federal and state payroll tax laws via the internet, track when payroll tax payments are due, complete federal and most state payroll tax forms – including W-2’s and 1099’s, file federal and state payroll tax forms electronically at no additional costs. Current pricing is $249.00 per year; however, beginning August 23, 2010 the price will be $274.00.
- Unlimited employees allows you to create paychecks for an unlimited amount of employees on a schedule of your choosing (weekly, bi-weekly, monthly, etc.), provides instant access to the most current federal and state payroll tax laws via the internet, track when payroll tax payments are due, complete federal and most state payroll tax forms – including W-2’s and 1099’s, file federal and state payroll tax forms electronically at no additional costs. Current pricing is $349.00 per year; however, beginning August 23, 2010 the price will be $374.00.
Assisted Payroll provides the best of both worlds and includes the convenience of having all of your payroll data living in your QuickBooks company file while having someone else (Intuit) be responsible for paying your taxes and filing your tax returns – including W-2’s. It comes in two versions – Assisted and Assisted Plus.
- Assisted your payroll is integrated inside of your QuickBooks company data file, you choose when you want to pay your employees (weekly, bi-weekly, etc.), you enter your employees time against various jobs, submit your payroll data to Intuit and they are responsible for paying your taxes, filing your tax returns, and completing your W-2’s (for an additional fee.) Current pricing begins at $60.00 per month; however, as of August 23, 2010 it will begin at $69.00 per month.
- Assisted Plus includes all of the features of Assisted payroll and also includes direct deposit (free of charge), payroll for additional states (free of charge), W-2 processing at no additional charge. Current pricing begins at $115.00 per month; however, beginning August 23, 2010 it will increase to $135.00 per month.
Payroll is an essential part of your business – not just a weekly, bi-weekly, or monthly annoyance. Payroll is the primary way that employees are rewarded for good job performance and retained. If you are issuing late or incorrect paychecks it can lead to dissatisfied, unmotivated workers – or worse. It’s hard to keep good employees when a company gets payroll wrong.
The relationship between employees and employers is highly regulated by the government and many of these regulations involve payroll. There are literally hundreds of things that you have to know, as well as hundreds of mistakes that you can make. As a result, the payroll process is much more complicated than anyone who has never done it can possibly know.
The consequences of some mistakes can be more serious than just your paychecks simply being incorrect. Many mistakes result in getting a very hard time from people you don’t know (and certainly don’t want to know) – the federal and state enforcement types.
Below are 5 Common General/Miscellaneous Payroll Mistakes that can occur all year long.
1. Poor Record Keeping
You’ll need to maintain payroll records as a chronological history of your employment practices, which is certainly troublesome; but, the alternatives are the usual – fines, penalties, interest, and even jail.
Approximately 10 different agencies and laws have their own requirements – counting the state as only one. Did someone mention the “paperless office”? Below is a list of common items that you must keep – but we certainly won’t even try to advise you on the “how long you have to keep them” aspect.
- Timesheets
- Cancelled or cashed checks, check stubs
- Payroll registers (reports) showing payment, work or trade classification, and deduction detail
- Federal and State W-4 Forms
- Copies of Certified Payroll Reports for each prevailing wage job
- Copies of Form W-2 and 1099
Some states and/or agencies require an employer to be able to provide copies of these records within a certain period of time or incur the fines.
2. Being Ill-Prepared for an Audit
An audit of any sort – be it Worker’s Compensation Insurance, Prevailing Wage Audit, State Unemployment Audit, or a General Liability Insurance Audit – can happen at any time. Being prepared for that Audit can cut down on the amount of time you have to spend gathering all the data and even can cut down the amount of time that the auditor has to spend to do the review. (Which translates into you not being able to do the other things that you need to because you have to keep stopping what you are doing and running off to “find” something.)
Be organized, keep good records, and make QuickBooks track some of the information for you.
- If you work on Prevailing Wage Jobs – purchase inexpensive 3-ring binders and keep a job notebook with copies of the Certified Payroll reports.
- File Weekly timesheets and payroll summaries together.
- Make sure that you use QuickBooks payroll wage items to track employee work or trade classifications.
- Make sure that you have current W-4’s, I-9, and W-9 information on hand.
- Create a custom field in QuickBooks to track when Subcontractor Worker’s Compensation Insurance Expires
These are just a few of the things that you’ll need to track – it does give you a starting point.
3. Breaches in Confidentiality
It’s seldom that anyone talks specifics about their salary in public and no one should find out someone else’s salary in private.
There is at least one taboo left in public discourse: your weekly salary. The best place to find out someone else’s salary is in your company’s payroll processing records.
Most large companies have full-time professionals using automated systems with high levels of security. But, when you do payroll, do you push your ledger sheets aside to the corner of your desk to take a call or does your accountant pass the task around to several bookkeepers in the office?
Your payroll system should be designed with complete confidentiality in mind. Remember, it tells how much money you make, too!
Of course, all this tends to go right out the door if you work on Prevailing Wage jobs as this information is used to verify that employees are being paid the pre-determined rate for the Work or Trade Classification in which they performed work. So, even here, there is an exception….
4. Check Fraud
There are dozens of ways to change the dollar amount on a regular business check and, unfortunately, more are being invented every day. With sophisticated color scanners, copiers and printers easily available, reproducing checks to commit fraud isn’t rocket science!
Perhaps no one working for you would ever commit check fraud, but they might endorse your check over to someone who would. . . or, could it be that the person who you least suspect (your accountant, bookkeeper, even a ProAdvisor) will commit check fraud – we all read about it often enough in the newspaper. As a business owner, make sure that you monitor your checking account on a regular basis – monthly – or, that you actually balance the company account on a monthly basis and question checks appropriately.
5. Thinking that “NONE of THIS APPLIES” to me
This is the most dangerous mistake of all! Please don’t think that your business is too small, to local, or too simple to have to comply with all these constantly changing federal and state rules and regulations. Thinking that “None of This Applies to Me” is dangerous – so don’t fool yourself.
Assume that you must comply until you are definitely told otherwise. If you aren’t sure ….. pick up the phone, make some calls and ASK!
FREE Payroll Mistakes eBook:
Did you find QuickBooks Tips – Payroll Mistakes – Parts 1-4 helpful and informative? If so, request our FREE 18 page eBook; Payroll Mistakes – It’s NOT As Easy As 1-2-3, which expands on this series.
Payroll is an essential part of your business – not just a weekly, bi-weekly, or monthly annoyance. Payroll is the primary way that employees are rewarded for good job performance and retained. If you are issuing late or incorrect paychecks it can lead to dissatisfied, unmotivated workers – or worse. It’s hard to keep good employees when a company gets payroll wrong.
The relationship between employees and employers is highly regulated by the government and many of these regulations involve payroll. There are literally hundreds of things that you have to know, as well as hundreds of mistakes that you can make. As a result, the payroll process is much more complicated than anyone who has never done it can possibly know.
The consequences of some mistakes can be more serious than just your paychecks simply being incorrect. Many mistakes result in getting a very hard time from people you don’t know (and certainly don’t want to know) – the federal and state enforcement types.
Below are top 3 most common payroll mistakes which occur at year end.
1. Messing Up Employee W-2’s
This common tax form, required to be filed by employers, suffers from frequent simple errors – which boxes to use – and other more complex errors.
You must deliver a W-2 to every employee by January 31st which shows their total wages and deductions for the prior year.
- You may also need to file this form with other government agencies by deadlines that depend upon your filing method – electronic or paper.
Mismatching names and Social Security numbers is one of the most common W-2 filing errors; this will result in earnings not being properly credited to employees and problems with Social Security payments farther down the road.
- The Social Security Administration runs a toll-free Employee Verification Service where you can verify up to five employee names and Social Security numbers at a time. To use this service, call 1-800-772-6270.
Leaving out other taxable items also happens frequently.
Other problems are easier to avoid:
- Don’t put dollar signs in the boxes – government scanners can often read them as an “8”.
- Don’t use a computer or typewriter font that is too big or too light – try to stick with a 12-point Courier font.
- Try placing the numbers in the center of the boxes.
For more information, contact the Social Security Administration at www.ssa.gov
2. Messing Up Form 1099-MISC
These forms are required for your independent contractors, and the IRS finds that businesses make many mistakes with these forms. You may end up being not only the receiver of a 1099 but the provider of them, as well.
- If your business provides services and is not incorporated, you may receive a Form 1099-MISC from your own clients and/or customers totaling their payments to you for the tax year.
- Regardless of what your business structure is (sole proprietorship, partnership, corporation) you are required to send a Form 1099 to report all payments for services of $600 or more to all of your own independent contractors.
- “Currently” there is no Form 1099 is required for payments to a corporation or for goods.
Form 1099-MISC is due to your independent contractors by January 31st and to the IRS by February 28th and, yes, there are penalties for not sending or filing them on time.
The easiest way to get the information that you need to complete Form 1099 is to send your vendors a Form W-9 (especially if you think you are going to pay them more than $600.00), before paying their first invoice, which requests their name, address, and Tax ID number – either Social Security or Federal Employer ID Number.
Use QuickBooks to it’s full potential. Each vendor record has an “Eligible for 1099” checkbox complete with a spot for their Social Security or Federal Employer ID number. Create a custom field in the vendor record to track whether or not you have a W-9 on file. When entering vendor bills remember to split out costs for goods and services.
3. Failure to Keep Up-to-Date W-4 Information
How long has it been since you last gave an employee a new Form W-4 to complete? Things change – employees get married, divorced, have children – and these changes have an impact on their withholding. At the end of each year (a good time to do this is the 2nd pay period before the end of the year) include new W-4 forms with your employee’s paycheck. Indicate that you need them back by the first of the year if there are any changes.
Part 4 will cover 5 Common General/Miscellaneous Payroll Mistakes that can occur all year long.
