As an employee, if you aren’t regularly monitoring your pay stubs and reviewing your earnings, withholdings for taxes and insurance, and retirement contributions, you may face a major—and potentially costly—surprise at tax time. Although an accountant will help you prepare your annual returns, avoiding the following mistakes will ensure you stay on track all year long. 

Avoid These Common Payroll Mistakes 

1. Claiming the Wrong Number of Allowances

Although your employer’s payroll service is responsible for withholding taxes from your paychecks, it’s up to you determine how much is withheld. If you claim zero exemptions on your W-4, payroll will withhold the maximum amount from your earnings. Claiming no withholding exemptions may result in a large refund, but it precludes your putting that money to work all year long. If, on the other hand, you claim too many exemptions, you may not have the savings to cover your tax liability by the end of the year.

For help in determining the right amount of tax to withhold from your earnings, confer with your tax preparer or use the IRS “withholding calculator."

2. Failing to Review Every Income Statement

Accounts and payroll managers advise employees to review every pay stub. Accounting errors, software glitches, and time clock issues, which may lead to payroll mistakes, will otherwise go unnoticed. And if you’re a freelance worker, make sure to cross-check every payment you receive against the original invoice to confirm accuracy. 

3. Miscalculating Retirement Contributions 

Saving for retirement should be part of everyone’s personal financial goals. Accountants urge individuals who have the means to max out their retirement contributions every year. If your employer has a 401(k) plan, the retirement contribution limit this year is $19,000 (and $25,000 if you’re over 50). Some employees, those who earn yearly bonuses, may have their 401(k) contributions deducted from their bonuses rather than from their regular pay.

If you’re unsure how much your employer should withhold from your paycheck every pay period, turn to the knowledgeable accountants at The Callen Accounting Group, PLLC. Based in Mountain Home, AR, and serving individuals and businesses throughout the Twin Lakes area, they’re proud to go above and beyond for their clients. From preparing tax returns to forecasting cash flow, their CPAs do it all. To schedule your first meeting with an accountant on their team, reach out online or call (870) 425-6066.