Regardless of your industry, running a successful small business comes with a host of challenges. Unless you own an accounting firm, you’ll likely face issues will payroll at some point. If you have yet to take advantage of payroll services, make sure to avoid these common mistakes when doling out checks each pay period.

3 Common Payroll Mistakes

1. Misclassifying Workers

It’s not uncommon for small business owners to misclassify employees as independent contractors and vice versa. The IRS has strict requirements for each type of worker. It’s up to those who are processing payroll to review these rules closely.

Failing to classify workers correctly could cause a number of issues at tax time for both you and your workers. If you’re unsure who’s an employee and who’s an independent contractor after reviewing the IRS’s definitions, an accounting firm that provides payroll services can weigh in. 

2. Mishandling Garnishments

If an individual falls behind financially, the court may reach out to his or her employer for payment. Unfortunately, not all business owners know how to handle court orders regarding wage garnishment.

Because the business is responsible for abiding by the decree, it must determine how to withhold the appropriate amount each pay period and where to send it. Otherwise, both the company and the employee in question could end up in legal trouble. 

3. Miscalculating Overtime 

Excluding exempt workers, those who put in more than 40 hours a week are entitled to overtime pay for each additional hour. Under the Fair Labor Standards Act, overtime pay must be at least one and a half times the employee’s normal wage. Some states have additional provisions, however, which can make calculating overtime pay especially challenging. Failing to abide by both federal and state law when processing overtime could result in fines and costly disputes that may even result in litigation.

Avoid these and other costly mistakes by working with Wilson, Rea, Beckel & Associates, CPAs, LLC for reliable payroll services. Located in Pagosa Springs, CO, this firm was founded in 2010 and has been serving small business owners ever since. Their team consists of experts in tax law, money management, and business accounting. To request a quote for their payroll services, reach out on their website or call (970) 731-1040.