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Several errors can impact your production budget, including taxing the wrong work state or country and missing pension hours for union employees. Getting these errors corrected before payroll is closed for the year helps avoid costly mistakes come year end.
Managing payroll taxes is one of the most complex aspects of running a business. Failing to properly withhold, deposit, and report payroll taxes can result in hefty penalties. In some cases, an employer may even be personally liable for unpaid payroll taxes. Keeping up with payroll tax requirements is essential for any small business owner.
Payroll taxes are levied on employee salaries, wages, and tips to fund social insurance programs like Social Security and Medicare. They also support federal income taxes, state unemployment insurance taxes, and various local business and occupation taxes. These taxes reduce the amount of an employee’s take-home pay, and they must be paid quarterly. Most employees will see their payroll taxes clearly listed on their end-of-period paystubs.
When new hires start working, they must complete a W-4 form that explains how much money should be withheld for federal tax withholding purposes. This is a critical step, and new hires should be aware that they can always adjust their tax withholdings as needed. Generally, payroll taxes are regressive, meaning that lower- and middle-income taxpayers pay a larger percentage of their incomes in taxes than high-income taxpayers.
Most payroll taxes are collected by employers, and they must remit them to the appropriate federal and state agencies on time. Some payroll taxes, such as FICA (Federal Insurance Contributions Act) taxes and state unemployment taxes, are collected by both employees and employers. In the event that an employer fails to collect or remit these payroll taxes, they can be subject to a 100 percent penalty. This penalty can be avoided if the IRS and state tax agencies determine that the failure to withhold, collect or remit these payroll taxes was not willful.
The good news is that there are ways to streamline the payroll tax process and make it more efficient. For example, using a payroll service or software can help you save time and avoid errors. It can also improve employee satisfaction by reducing the amount of paperwork they have to complete. In addition, an online payroll solution can help you stay compliant with local, state and federal laws.
Union Dues
Most workers in unionized workplaces pay dues – a predetermined portion of their paycheck that supports the activities of a labor union. These are typically deducted from each paycheck and sent by the employer directly to the union. The amounts are designated on each paystub along with other proportionate deductions like income tax and insurance. Some unions use dues to help members negotiate wages and working conditions with employers, and some may provide education and training. Other uses include a strike fund and private benefits plans.
Dues can range widely based on the specific union, but many set them at between 1.5 and 3 percent of a worker’s total pay. The International Brotherhood of Electrical Workers, for example, says a member’s investment in dues yields a salary 20 percent higher than the nonunion average.
Some unions impose mandatory dues on their members, a condition governed by state laws and union contracts. These arrangements can create legal monopolies that give unions leverage to extract high dues from their members. Some economists have raised concerns that union monopolies make unions behave more like Mafia mobs than democratic organizations, and that high dues contribute to the overpay of top union officers.
Whether a worker can afford union dues depends on many factors, including the amount of their earnings and whether their state has right-to-work laws that prohibit union security agreements. However, anti-union messaging often portrays membership fees as too expensive, and many workers believe that they cannot afford their dues.
A reputable union can explain the value of their service to workers and show how their dues are spent. For instance, a union could describe how the money helps set up a “worker-controlled war chest” to help organize co-workers and fight for improvements in the workplace, as well as to offer safety programs. Dues might also be used to cover expenses such as a strike fund and private benefit plans, which are designed to help workers cope with the financial impact of job loss and medical bills.
An above-the-line deduction for union dues would reduce taxable income for nearly all people who pay them, even those who itemize. The TCJA’s elimination of the deduction appears to be part of an effort to undermine labor unions and put corporate interests ahead of those of workers.
Direct Deposit
Direct deposit is a service that lets employers send funds electronically into a payee’s bank account instead of through a paper check. This type of deposit uses an electronic network called the Automated Clearing House (ACH) to transfer money between banks. It’s most commonly used to send salaries, tax refunds, investment redemptions and government benefits.
When someone is paid through direct deposit, the funds are automatically sent to their bank ahead of their payday. Once the payee’s bank receives the deposit, they release the money into their checking or savings account. People can also choose to split their direct deposits into multiple accounts based on their preferences and financial goals, such as having their paychecks sent to one for bills, another for emergencies and one for long-term savings.
The main advantage of direct deposit is that it eliminates the need for employees to submit paper paychecks to their employer. This saves time and reduces the risk of lost or stolen checks. It also helps to save money on postage and envelopes.
To start using direct deposit, employees must first sign up for the service with their employer. Typically, this is done by completing an online form or by providing the necessary information in person. Some companies may even offer a mobile app that allows employees to sign up on the go.
Once direct deposit is set up, it can take a few payroll periods for the first checks to appear in employees’ accounts. This is because the bank needs to verify that the information is correct and the employee has a valid bank account. In addition, the bank must process the payment and transmit the funds to the ACH network.
Once the payroll process has processed, the employee can access their paycheck by using an all-in-one HR solution or the company’s website. Some companies may choose to print physical checks in addition to the automated deposits, but this is not required.
Timecard Approval
Time card approval is a critical step in the payroll process. It’s a way to ensure that employees are paid for the hours they work, and it helps prevent costly errors in payroll processing. It’s also a crucial part of compliance with labor laws, as well as keeping employee records and timesheets organized.
During the timecard approval process, supervisors will review employees’ hours and make any necessary corrections before submitting them for payroll processing. They may manually document the hours worked or use modern time tracking software to review and approve each timecard. Some companies may allow employees to edit their own time cards after a manager or admin has signed off on them, but this will vary depending on company policies and procedures.
The best time card approval apps can simplify the process by allowing managers and admins to quickly view and approve time entries from one hub or dashboard. This can save them valuable time, and it also makes it easier to catch any discrepancies or issues with the data they are reviewing. Additionally, a good time tracking app will provide real-time data analysis and reporting that will help managers and admins make informed business decisions.
When a timecard is approved, it will be marked with a green background and a checkmark to indicate that it has been reviewed and approved. If any changes are made to a time card after it has been approved, the status will be changed to yellow and the approvals will need to be revised.
Once a timecard has been approved, it can be used to calculate each employee’s gross earnings for the pay period. Then, all applicable deductions and withholdings can be deducted or withheld from an employee’s gross earnings to arrive at their net pay. The calculation will take into account an employee’s taxes, health insurance premiums, retirement contributions, garnishments, and other authorized deductions.
A streamlined timecard approval process can help your business save money, improve compliance with labor laws, and reduce the number of mistakes in the payroll processing cycle. It’s important to establish clear policies and communicate them with your employees, and to regularly hold training sessions to educate employees about how to properly fill out a time card and submit it for review. This will help eliminate misunderstandings and avoid any unnecessary back-and-forth communication that could lead to payroll errors.