Monday, August 24, 2009

Payroll Forms Reporting Errors

Mistakes on payroll reporting forms can be time consuming and costly. With 941 time (always seems to be that time) and W2 season approaching fast now may be a good time to take a look at some of the frequent mistakes.

In general some of the most frequent reporting errors revolve around identifying the business and employee. The SSA and the IRS use the EIN and SSN for identification purposes. Your nine digit EIN should be correct and match on both your 941 and W3 forms. The social security number and employee’s name must match in the SSA’s file. Using titles such as Mr. and Mrs. in the name field may hinder the electronic identification of an individual. Another mistake can be made when reporting wages the year after an employee has passed away. These payments cannot be considered wages they must be reported on a 1099 Misc form in box 3.

Out of balance reports can occur due to several different circumstances. Omitting wages and/or taxes on a wage report or making a decimal error when reporting the wages and/or taxes. Always use a decimal point and report dollars and cents even if it is .00. Using the maximum Social Security wage amount for a prior year instead of the amount for the current tax year reported can be avoided by being an informed employer.

Specific W2/W3 form mistakes may be: not filing with SSA, using incorrect forms, not reporting the correct Medicare wages, or checking and/or not checking the proper boxes on the W2 form itself. W2 forms are to be filed with SSA not the IRS. Paper W2 copy A and W3 forms must be printed in OCR red drop-out ink on paper of the proper weight, margins and format. All paper forms must meet IRS regulations, red ink forms must be scannable and the forms must be for the correct reporting tax year. Remember, Medicare wages/tips do not have a limit that is subject to Medicare tax such as social security wages. Avoid checking the void box unless you do not want those wages reported. Another box to pay attention to is box 13 this includes the retirement plan box always check this box if your employee participates in a retirement plan.

Another important reporting form with frequent errors is the 941 Form. Some mistakes pertaining to these forms are again incorrect Medicare/Social Security wages and box 13, as pertaining to third party sick pay, also failing to file corrected forms and filing duplicate 941 forms. As with W2 forms separately report Medicare and Social Security wages but do not report amounts not covered by Social Security/Medicare wages such as employee earnings exceeding the yearly taxable amount for Social Security wages and payments to an independent contractor shown as wages.

If you need to adjust a prior year’s earnings on a 941 Form you must file W2c and W3c forms. Do not file duplicate 941 forms. This may happen if you include information from one month in two different quarterly filing reports. All these mistakes can be time consuming for the business owner to rectify and possibly incur monetary penalties.

Let’s try not to give anymore time and money than is required. Being vigilant and informed when inputting information and generating forms can help us avoid mistakes. Measure twice cut once as the saying goes, double check your forms the first time around to avoid a second time around.

Monday, August 10, 2009

Federal Minimum Wage Increases

On Friday July 24, 2009 the federal minimum wage increased to $7.25. This increase affects a number of states and all employees who are covered by the Fair Labor Standards Act (FSLA). The increase is the third and final in a succession of increases, over a three year period, mandated by a bill that was passed in 2007.

The most recent increase will improve the wages, for employees, in thirty states (Alabama, Alaska, Arkansas, Delaware, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maryland, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin and Wyoming) across the country. These states were either below the federal minimum wage or did not have a minimum wage. Under the Fair Labor Standards Act all employers, with very few exceptions, are required to the federal minimum wage to their non-exempt employees.

To be in compliance with the FLSA all employers subject to the requirements, must post a notice explaining the act. This notice must be posted in a prominent workplace so that employees can easily read the provisions. Posters and other compliance assistance materials concerning the minimum wage increase are available free of charge from the Labor Department's Wage and Hour Division.

In today’s economic climate full-time and part-time employees, whom the change affects, will welcome a boost in their paycheck. Employers may be nervous about the change if they are still manually calculating payroll. A simple solution, for small business owners in this situation, would be to invest in employee payroll software. A small upfront investment saves time, money and aggravation in the long run.

Try a free demo version of this small business payroll software: software download