Payroll becomes more complex when you’re dealing with the payroll rules of another country. International companies may find they struggle with the US payroll process even more than they do with the process at home.
If you’re planning to expand to the US, here are a few of the most common mistakes to watch out for when you complete payroll.
1. Keeping on Top of Deadlines Is a Challenge in the US Payroll Process
Missed deadlines are probably the most common mistakes in the US payroll process for any business, international or otherwise.
The IRS sets out a schedule of remittances, which is usually based on how often you complete payroll. If you pay your employees every two weeks, you’ll need to make sure you’re remitting the tax withholdings to the IRS within so many days of completion.
There are other deadlines as well, such as the deadline for sending in information for new hires and the deadline for sending out certain income tax forms.
2. Worker Misclassification Is Common
Worker misclassification has become an important topic in the last ten years or so. The IRS now offers guidelines on how to classify your workers, and they’ll also review cases to determine whether misclassification took place. Some states have introduced their own penalties for misclassifying workers.
Accidental worker misclassification is easier and more common than you might realize. You may think you’ve hired a contractor, but if you have control over all aspects of the job, it’s likely you’ve hired an employee.
Your responsibilities as an employer are different when you work with a contractor. This can affect the US payroll process, so you’ll want to be sure you classify your people correctly.
3. Poor Record-Keeping
Many countries set standards for record-keeping, and they’ll also lay out regulations regarding how long you need to keep those records for. The rules surrounding records in the US payroll process are different from those you encounter at home, so you’ll want to read the fine print.
Poor record-keeping is common in the US, particularly with regard to data entry. You may want to check you’re not only keeping the right records but keeping accurate records as well.
Finally, be sure to verify both state and federal law about how long you need to keep records on hand. Different types of payroll records need to be kept for different amounts of time. The rules may even change depending on the job or the industry you’re in.
4. Paying the Wrong Tax Rates
The US has a graded system of taxes, which means the more an employee earns, the more they pay in tax. These tax brackets are always changing, so you need to be sure you’re using the right taxation rate. If you don’t, you or the employee could end up owing the IRS at the end of the year.
There are other taxes you’ll need to withhold as well, including withholding for Social Security and Medicare.
5. Miscalculating Overtime
Another common error for international businesses is paying overtime incorrectly. Be sure to check the rate, as well as whether there are any exemptions.
The US payroll process can be challenging, which is why it’s never a bad idea to get a helping hand. Get in touch with a professional employer organization (PEO) and make your US payroll easier than ever.