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The International Employer’s Survival Guide to US Payroll Taxes

Posted by Corinne Camara

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Jun 12, 2019 9:00:00 AM

The International Employers Survival Guide to US Payroll TaxesInternational employers have their work cut out for them. Since they employ people in multiple countries, they have to contend with the employment and payroll legislation in not just one, but many different locations.

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Learning the rules and regulations in one market is often more than enough for a payroll team. You may need to bring in outside help or hire specialists to make payroll easier.

If you’re operating in the US, you might feel a little overwhelmed by US payroll taxes. There are many different rules to contend with, and one mistake can lead to a cascade of problems. This guide will help you master the basics, so you can conduct payroll for your American employees with ease.

The Different Levels of US Payroll

The first thing any international employer needs to know about US payroll taxes is that there are a few different levels and types of taxes.

The US has three levels of government. Depending on where you and your employees are based, you may end up having to pay federal, state, and local payroll taxes.

The types of taxes assessed at each level also differ. The federal government and state governments both collect income tax and unemployment taxes. Only the federal government collects FICA taxes.

Local governments may collect taxes for local infrastructure, such as schools or public transit.

Who Pays the Tax

Another key to understanding US payroll taxes is to know who is responsible for paying tax. Some taxes are collected from employees’ earnings. Others require a joint contribution from both the employee and employer. Still other taxes are the responsibility of the employer alone.

Both federal and state unemployment taxes are usually paid by the employer alone. In some states, though, employees share the costs of unemployment programs. FICA taxes, which include Medicare and Social Security, are always a joint payment. Employees and employers each pay half of the 2.9 percent contribution.

Income taxes are withheld from the employees’ earnings. The employer collects and remits the funds to the IRS, but isn’t expected to contribute to the payment.

Collections - Schedules and Payments

For every different tax an employer must collect, there’s a schedule to follow. Your schedule is often set by the size of your company. In general, it’s a good idea to determine which taxes you need to collect and remit. Then you’ll need to find out who the funds are remitted to. Some funds will be sent to the IRS, while others will be sent to the appropriate state or local authority.

Once you’ve determined who is receiving the funds, you’ll be able to read their rules for remittance schedules. The IRS will send you statements with this information.

There are also reports you’ll need to file for the different taxes you collect on your US payroll. Some taxes are reported on a quarterly basis, while others might have an annual reporting period.

Filing a report late and sending in payments after your deadline are some of the most common reasons employers face penalties.

Determining Rates

Most US payroll taxes are based on employee earnings. Federal income tax brackets change as employees earn more. Medicare is capped at 2.9 percent up to $200,000. Employees earning more than this amount have to pay an additional percentage.

Some employers pay just a fraction of the federal unemployment tax rate. If you pay your state unemployment taxes on time, you could qualify for a discount.

Get the Support You Need

Now you know some of the fundamentals of US payroll taxes, which can help you avoid penalties. If you still need help, though, don’t be afraid to call in the experts. A PEO can make paying your US employees easier than ever.

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Topics: Payroll

Payrolling US Workers from Abroad? 5 Laws You Need to Know

Posted by Karen McMullen

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May 20, 2019 9:00:00 AM

Payrolling US Workers from Abroad 5 Laws You Need to KnowTalk to almost anyone who employs a worker in the US, and you’ll likely hear about the myriad rules that govern how you pay your team members. Conducting payroll in the US can be a bit intimidating for that reason.

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It’s imperative for international companies to familiarize themselves with the laws, especially if they want to reduce risks and avoid penalties. Review some of the major federal laws you’ll need to be familiar with if you’re planning to pay US workers from abroad.

1. The Fair Labor Standards Act

The Fair Labor Standards Act, or FLSA, was introduced in the 1930s. It’s been updated periodically since then. It’s designed to cover full-time and part-time workers in both the private sector and at all levels of government.

The FLSA sets a federal minimum wage and also governs overtime. Currently, overtime wages are set at one-and-a-half times an employee’s regular hourly wage. The FLSA also governs the number of hours minors can work.

It’s important to note that the FLSA doesn’t cover all workers in the US. It offers individual coverage and enterprise coverage. Workers in certain industries may be exempt from some of the regulations, such as overtime pay.

It’s also important to note that state law can override the FLSA. Many states, for example, have higher minimum wages than the federal rate. In these cases, employers would need to comply with state law.

2. The Federal Unemployment Tax Act

If you are a private, for-profit enterprise operating in the US and employing American workers, you may need to pay unemployment taxes, as per the Federal Unemployment Tax Act. Also known as FUTA, this Act coordinates with state unemployment systems to provide unemployment compensation for people who lose their jobs.

Employers alone are responsible for FUTA payments. Employees don’t pay a portion of these funds through payroll deductions. Requirements vary from state to state, as each state administers its own unemployment program.

3. The Federal Insurance Contributions Act

If you’ve heard someone talk about FICA payroll deductions, you’ve encountered the Federal Insurance Contributions Act. This is the legislation that provides for programs like Medicaid and Social Security.

FICA requires employers to make deductions from their employees’ paychecks. These withholdings are then used to pay into social programs. Employers are asked to provide a match for what they withhold from their employees.

You’re expected to withhold 1.45 percent of wages for Medicare and up to 7.65 percent for Social Security. If your employees earn over $200,000, there’s another surtax as well.

4. Employee Retirement Income Security Act

You may not be subject to the Employee Retirement Income Security Act, but it’s a good law to know if you have US employees.

ERISA governs pension plans offered by companies in the US. While it doesn’t require an employer to offer a retirement plan, it does set up standards for pension plans. This includes how to report on plans as well as disclosure and fiduciary requirements.

5. The Family Medical and Family Leave Act

The Family Medical and Family Leave Act may not seem like it will have much of an impact on your US payroll operations at first. It provides only unpaid leave for your employees, which means you don’t need to worry about paying them if they do take leave.

Nonetheless, it’s a good idea to pay attention to the provisions in this law. It requires you to provide workers with up to 12 weeks of leave following the birth or adoption of a child, or for serious illness of the employee, their spouse, a child, or a parent.

This leave is job-protected, so you’ll need to know how to fill the position while the employee is away.

This list provides a good starting point for international employers. There are many other US laws that affect how you’ll handle payroll for your US workers.

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Topics: Payroll

5 US Tax Forms International Companies Employing Workers in the US Need to Be Familiar With

Posted by Ray Gonder

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Apr 22, 2019 9:00:00 AM

5_US_Tax_Forms_International_Companies_Employing_Workers_in_the_US_Need_to_Be_Familiar_WithIf you’ve just expanded your business to the United States, you’ve taken a huge step toward growth. Now you want to ensure the success of your expansion. One of the best things you can do is secure the right people.

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Another key is making sure you’re following the law, including tax regulations and employment legislation. Whenever you hire a new worker, you’ll want to be sure you’re familiar with the forms you’re legally required to submit.

You’ll need to submit some US tax forms when you first hire an employee. Some will need to be issued on an annual basis, while others will need to be updated from time to time. Here are five forms you should be familiar with if you plan to employ even one worker in the US.

1. Form W-4 Allows You to Withhold Taxes

The first form you’ll have any employee fill out is a W-4. This form authorizes you to collect and withhold income tax from the employee’s wages.

If an employee doesn’t fill it out, you can’t pay them. It’s in their best interests to complete this form and allow you to file it as soon as possible.

2. Form I-9 Verifies Employment Eligibility

Everyone you hire for your business operations in the US should be legally allowed to work. That’s why they must fill out Form I-9, Verification of Eligibility for Employment. If an employee refuses to fill out and file an I-9, they may not be eligible to work.

Hiring workers who aren’t eligible to work in the US can have repercussions on your business. You may be penalized by the IRS or even subject to visits from immigration officers. It can also disrupt tax withholding and payroll, as employees who are not eligible for employment may also not fill out Form W-4 discussed above.

3. Form W-2 Must Be Filed for Income Tax

As an employer, you’ll also need to fill out and remit Form W-2 each tax year. If you pay any employee more than $600 US in a year, you must complete this form and file it with the IRS.

A copy of your filing should also be sent to the employee for their records. Legally, you must send out W-2s before the end of January each year for the previous year. If you know this is going to be a challenge for your business, you may want to outsource payroll.

4. Form 1099 Is for Contractors

There may be times when you hire workers who don’t quite fit the bill as “employees.” You may hire them for a special project or for consulting work. These people are contractors, and you’ll need to fill out Form 1099.

Contractors engage with you on a business-to-business case, so you don’t need to withhold taxes from them. They don’t need to fill out Form W-4 to authorize you to withhold taxes since they look after their own taxes. Instead of a Form W-2, you’ll provide them with Form 1099 at the end of each tax year.

Make sure you’re classifying your employees and contractors correctly. Employee misclassification can result in penalties for your business.

5. Form SS-5 Must Be Filled out If an Employee Doesn’t Have a Social Security Number

If you hire a new employee, but they don’t yet have a social security number, then they need to apply for one. Form SS-5 is the form they’ll need to fill out.

You’ll need to be sure the employee obtains a Social Security number before you can proceed with the rest of the forms.

These are only some of the forms you’ll need to look after if you employ workers in the US. If you're having trouble keeping up with all the paperwork, you might want to think about outsourcing to a professional employer organization (PEO).

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Topics: Payroll

4 Tips to Compare US Payroll Service Providers

Posted by Karen McMullen

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Apr 17, 2019 9:00:00 AM

4 Tips to Compare US Payroll Service ProvidersWhen you’re expanding to the US market, there are many challenges you’ll face. One of the ongoing issues for global companies is employing American workers. From hiring to termination, there are many tasks to be managed, and you’ll need to be familiar with the ins and outs of American employment regulations.

Request a quote for US payroll services today!

One way to make these tasks easier is to work with US payroll service providers or a professional employer organization (PEO). The experts on staff can help you manage payroll, monitor compliance, and more.

The question is, how can you be sure you’re hiring the right company? During the decision-making process, you’ll need to compare and contrast different providers. Use these tips, and selecting the right provider will be easier.

1. Ask about Support from US Payroll Service Providers

The first thing you should do is ask about the kind of support you’ll receive with your payroll service. Will you have a dedicated agent or team of people working on your account? Can you contact them? If there’s a significant time zone difference, and how will they manage this?

You should also ask about support for different systems and programs they use. Will you be required to use their programs to log information?

Support is a key factor in finding the right payroll service provider.

2. Determine Your Needs

When you’re comparing US payroll service providers, it’s easy to get caught up with extras you don’t necessarily need. It can also be tempting to choose a bare-bones plan that doesn’t meet all your needs because it fits your budget.

Always keep your needs in mind. If you’re going to need help with more than just US payroll, it might be a good idea to work with a professional employer organization that offers support for human resources, compliance, legal, and more.

3. Ask How They’ll Grow with You

As a business leader, you need to be forward-thinking, so you should take steps to future-proof your relationship with your payroll provider.

You plan to grow your US operations, so ask how the payroll provider will scale with you. Can they keep conduct payroll for 100 or 10,000 employees? If not, it might be time to consider someone else.

4. Think Beyond Payroll

Payroll is certainly one of the more time-intensive tasks related to the employer-employee relationship in the US. It’s far from the only aspect you need to consider.

As you compare US payroll service providers, you should consider whether you need services that go beyond payroll. Would it be helpful to have assistance with HR compliance? What about delivering training and onboarding?

You may want to consider PEOs over US payroll providers alone. A PEO can help you manage payroll and so much more, which could be key to your success in the US market.

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Topics: Payroll

5 Common Mistakes International Companies Make in the US Payroll Process

Posted by Anna Mastrandrea

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Apr 15, 2019 9:00:00 AM

5_Common_Mistakes_International_Companies_Make_in_the_US_Payroll_ProcessPayroll 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.

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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.

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Topics: Payroll

International Companies FAQ: Who Pays Payroll Taxes in the US?

Posted by Corinne Camara

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Apr 10, 2019 9:00:00 AM

international-companies-faq-who-pays-payroll-taxes-in-the-usAs you expand your business operations across international borders, you have to familiarize yourself with new regulations. Employment law is one major area of concern. Health and safety might be another. Most international companies are also concerned with business structure and tax programs.

Download "7 Challenges Companies Face When Expanding into the US" eBook

Another worry you likely have is US payroll. Most international companies deal with payroll, and most people have questions about how to handle tasks like calculating overtime and paying payroll taxes.

You may even ask, “Who pays payroll taxes in the US?” The answer is a bit more complicated than you might expect.

Who Pays Payroll Taxes in the US?

Several entities may be called on to pay payroll taxes in the US. The most likely scenario is that you as the employer will need to handle payroll taxes for your employees.

As the employer, you’re in charge of paying your employees. You know they’ll need to pay a certain portion of their income to the IRS at the end of the year. If they don’t, you could end up on the hook for their missing payments.

Employers are thus mandated to hold back a portion of an employee’s paycheck and submit that money to the IRS. This is a form of “safe keeping.” Individuals are less likely to save on their own, so this makes it easier for your employees to know they won’t owe the IRS large lump-sum payments.

It also means the IRS won’t turn to your company to find the money your employees aren’t paying them.

The IRS requires employers to remit their payroll taxes on a regular basis.

Contractors Pay Payroll Taxes in the US

There’s another group that comes to mind when you ask, “Who pays payroll taxes in the US?” Contractors are responsible for their own payroll taxes.

Independent contractors, or 1099 employees as they’re sometimes known, act as independent businesses. They’re more like partners than employees. You might hire them to deliver certain services or to produce a product.

Since they’re operating as their own business entities, you’re not responsible for collecting and paying payroll tax for them. These self-employed entrepreneurs will be responsible for remitting their own taxes.

You want to be sure you’re filing the proper paperwork on 1099 contractors. Use the IRS’s assessment to determine whether someone is a contractor or an employee to avoid misclassification. Then have the contractor sign the right forms to release you from withholding obligations.

A PEO Handles Payroll Tax on Your Behalf

There’s another type of entity that can pay payroll taxes in the US. That’s the professional employer organization, or PEO.

Many international companies hire PEOs to help them conduct payroll activities in the US. Generally, the international company pays a fee to the PEO that helps them cover salaries, benefits, and other costs associated with employees.

The PEO would be responsible for paying payroll taxes. Since they’re handling your payroll, they’ll calculate not only what employees should be paid but also what needs to be held back and remitted to the IRS. Although you’re ultimately paying the tax, the PEO handles the calculation, paperwork, and remittance.

So, who pays payroll tax in the US? Several different entities may be responsible. If you need a hand with your payroll, talk to a PEO and discover how they can help.

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Topics: Payroll

US Payroll Considerations to Keep in Mind before Expanding

Posted by Shannon Dowdall

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Apr 8, 2019 9:00:00 AM

US Payroll Considerations to Keep in Mind before ExpandingIf you’re planning to expand your business to the United States, you have plenty to learn about your new market. Some of it will be cultural, while other challenges will appear in logistics, supply chain management, and employment.

Request a quote for US payroll services today!

There will also be rules and regulations you have to familiarize yourself with. Some of those will be associated with US payroll. If you plan to hire and pay American workers, you’ll want to keep these considerations in mind.

US Payroll May Have to Be Conducted at Certain Intervals

There is no federal regulation dictating when you have to pay your employees in the US. If you want to pay them once a month or once a year, that’s absolutely legal according to federal law.

Individual states may have different rules on the matter, so you’ll want to check the legal fine print wherever you choose to set up shop. If you’ll be operating in two or more states, keep in mind that the regulations may differ.

The IRS Schedules Remittance Payments

Once you’ve established a schedule for conducting payroll, you’ll need to consult with the IRS to determine when your payroll remittances will be due.

The IRS collects federal income tax withholdings, which can range from around 10 to almost 40 percent of an employee’s wages. This is tied to how much they make.

The tax you withhold from your employees must be remitted to the IRS within a specified period. If you don’t submit on time, you’ll be subject to penalties for late payment. You’ll also need to get the proper paperwork submitted.

Tax Isn’t the Only Withholding

Income tax is the biggest portion of US payroll withholdings, but you will also have to hold back funds for programs like Social Security and Medicare. These withholdings are assessed as a percentage of wages.

As the employer, you’ll be required to supply a match for what you hold back from your employees. Keep in mind that portions of some employees’ salaries may be exempt if they make above a certain amount.

Misclassification Is an Easy Mistake

In recent years, the IRS and several states have become more concerned with employee misclassification. This situation usually arises when an employee is misclassified as a contractor.

You may know that, in US payroll, you don’t need to hold back income tax or payments to social programs like Medicare from 1099 contractors. If an employee has been misclassified, however, you may need to pay.

It’s a good idea to monitor worker classification to ensure compliance.

Minimum Wages and Overtime

Other aspects of US payroll you’ll want to keep in mind are regulations about minimum wages and overtime. The US federal minimum wage is $7.25 per hour.

Individual states are allowed to set minimums higher than the federal wage. Some states do not set their own minimum. Most do, and some of them have wages that are substantially higher than others.

Overtime is another key concern for employers. Some employees are exempt from overtime requirements, but many are paid time and a half if they exceed full-time work hours. The number of hours that count as “full time” can vary by industry and even by position, so you’ll need to pay careful attention to this aspect of your payroll activities.

Help Is Close at Hand

Perhaps the most important matter to keep in mind when it comes to US payroll is that you don’t have to go it alone. A professional employer organization can help you navigate the waters and conduct payroll correctly and on time.

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Topics: Payroll

An International Employer’s Basic Guide to American Payroll

Posted by Corinne Camara

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Mar 25, 2019 9:00:00 AM

There are many different factors to consider when expanding to the US market. You’ll want to research local laws, as well as the American understanding of your product or service. How much demand is there for what you offer?

Request a quote for US payroll services today!

Another challenge of expansion is hiring and paying American employees. Payroll can be challenging in any market, but international employers may be at a loss when following American regulations.

If you’re seeking direction, start with this basic guide to American payroll. It outlines the major facets of conducting payroll for your US operations. From this solid foundation, you’ll be able to learn and grow.

The Basic Guide to American Payroll Starts with Compensation

Many countries, including the United States, have laws regulating compensation.

The federal government sets a minimum wage for US employees. Some states also set their own minimums. In most cases, state minimum wages exceed the federal level. Some states don’t set minimum wages.

The federal government has no legislation for how often employees must be paid. In the absence of a law, you can choose how often you want to conduct payroll. You could conduct it once a week, once a month, or even once a quarter if you wish.

States do provide regulations on the frequency of pay periods. Depending on where you operate, you may be obligated to conduct payroll on a more regular basis that you might otherwise choose to.

Taxation and Withholding

The next point in this basic guide to American payroll is taxation and withholding. As in some other countries you may operate in, you’ll be expected to withhold income tax from your employees’ wages.

You’ll need to consult with the most current income tax tables, which are published by the IRS. Tax brackets in the US range from about 10 percent to nearly 40 percent. The applicable tax bracket for any given worker depends on how much they earn. Those who make more will be taxed at a higher rate.

As the employer, you’ll be responsible for filing certain forms, as well as remitting payroll taxes to the IRS on time. For example, you’ll need to file Form 941 for quarterly reconciliation.

Employees must also pay into government-sponsored programs like Medicare and Social Security. You’ll be expected to deduct these premiums from employees’ pay, as well as to provide the employer match portion.

In some states, you must collect and remit state income tax. Finally, you should understand the unemployment tax regulations regarding what you may need to collect and remit.

Considering Labor Laws in the US

How you compensate an employee may be governed by a federal or state regulation.

For example, there are laws about when you’ll need to pay overtime. Some employees are exempt from overtime requirements.

Termination may be another area of concern. There is no federal law governing how employees are terminated, but individual states can set their own rules. In some places, you may need to pay employees for unused time off.

Finally, you’ll want to keep track of paid and unpaid time off. The Fair Labor Standards Act (FLSA) provides little in the way of paid leave. The Family Medical Leave Act (FMLA) provides for 12 weeks of unpaid leave. There are 10 national holidays, but they aren’t paid days off.

A basic guide to American payroll can help you get started and stay on track when it comes to paying your employees in the US. Once you’ve mastered the basics, you’ll have an easier time administering payroll.

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Topics: Payroll

The Real Cost of Payroll Errors in the US

Posted by Anna Mastrandrea

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Mar 13, 2019 9:00:00 AM

The Real Cost of Payroll Errors in the USThe IRS has estimated that around one-third of employers make a payroll mistake in any given year. The average cost of these mistakes to employers clocks in at nearly $850 per year.

As a global employer, however, you’re wondering exactly how much payroll errors are costing you. The answer depends on the types of payroll mistakes you’re making.

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This guide will go over some of the most common errors payroll administrators make. It will also examine just how much these errors could be costing you.

Failure to Pay Is Among the Most Common Payroll Mistakes

The IRS hands out millions of payroll penalties in any given year. The bulk of those penalties are assessed as “failure to pay.”

Failure to pay means you didn’t pay all or part of the payroll taxes you owed as an employer. You may have remitted your income tax withholdings, but you forgot to submit Social Security and Medicare taxes.

The IRS assesses penalties for unpaid payroll taxes, to the tune of 100 percent of the unpaid tax plus interest. The longer the money is unpaid, the higher the interest rate will be.

You may also be penalized if you fail to file Form 941, which relates to your income tax and FICA remittances.

Each W-2 Form Can Cost You

Another common mistake employers often make is forgetting to send Form W-2 to each employee at the end of January for the previous tax year.

This mistake can add up in a large company. The IRS penalizes you $50 for each form you fail to send. If you have 10 employees, that could result in a fine of $500.

You Misclassified Workers

The IRS and various state governments have been trying to crack down on employee misclassification. This situation commonly arises when an employer assesses a worker as a 1099 contractor.

If the IRS determines this worker is actually an employee, you’ll be responsible for paying all of the tax you should have withheld. If the dispute drags on, this can mean paying back-tax for multiple years, which could cost you thousands of dollars.

The Toll of Payroll Mistakes on Your Employees

One of the more “hidden” costs of payroll mistakes is the toll it takes on your staff. If payroll is constantly being administered incorrectly, employees may need to deal with overages and shortages in their pay on a regular basis.

This creates a situation where the employee may lose trust in you and possibly decide to leave the company.

When this happens, you will need to account for the costs of turnover and hiring. While it can be difficult to pinpoint the exact reasons for turnover, the way you handle payroll could be a factor.

If you need to hire employees to replace those who leave, you should consider how much of this additional cost is directly related to payroll errors. Would you need to hire if your payroll was handled more efficiently?

The Labor Costs of Correcting Errors

Unlike hiring and employee turnover, the costs of correcting your payroll mistakes are easy to attribute. When you add them up, you’ll realize each error is costing you more than the penalty you paid to the IRS.

If you need to call someone in to work overtime to get all of your Form W-2s prepared and mailed, those costs must be added to what you’re paying the IRS in penalties. Suddenly, your costs may have jumped from $500 to $1,000.

Get a Helping Hand with Payroll

Once you’re able to consider all the factors involved in payroll penalties, it’s easy to see just how much payroll mistakes are actually costing your global business.

The best way to avoid these costs is to work with an expert team. If you need a hand, get in touch with a professional employer organization in the US to explore your options for better payroll.

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Topics: Payroll

5 Important Things Global Companies Need to Know about American Payroll

Posted by Shannon Dowdall

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Mar 11, 2019 9:00:00 AM

5 Important Things Global Companies Need to Know about American PayrollThe United States is one of the largest economies in the world today, and success in the American market often predicts success in other markets. It’s little wonder that so many global companies put the American market on a pedestal when it comes to expansion targets.

Request a quote for US payroll services today!

If you do plan to expand into the United States, you’re probably aware that it comes with a few challenges. The American market can be difficult to crack. Expansion needs to be planned and executed properly.

Beyond concerns about American consumers responding to your product or service, there are also business processes you must pay close attention to. A good example is American payroll. Although you’re likely familiar with payroll regulations in your home market, there are a number of differences to watch out for in the US.

If you plan to employ Americans to staff your expansion or provide service to your customers in the US, you’ll need to know about these five important aspects of payroll.

1. American Payroll Doesn’t Have Set Pay Periods

Most aspects of payroll in the United States are governed under federal law. Individual states are allowed to adopt rules adding to or building on the federal rules.

A good example is the lack of set pay periods in US federal law. There is nothing within American labour law that states when or how often employees must be paid. Employers are free to choose when to pay their employees. If desired, you could pay your employees one lump sum every year.

Some states have created their own rules, so you’ll need to ensure your company policy is in line with the law where you operate. If there is no regulation, you’re free to choose what will work best for your business.

2. Employers Are Responsible for Several Payroll Remittances

Tax withholding is fairly common around the world, and in the United States, the IRS considers it mandatory for employers to remit tax withholdings to them. Employees may be taxed at rates anywhere from 10 to nearly 40 percent, depending on how much they earn.

This only accounts for the federal portion of income tax. In most states, there is also a state income tax. Employers are expected to withhold this amount and submit it to the appropriate state revenue department.

Unemployment taxes are also levied on the employer.

3. Employers Contribute to FICA

Under the Federal Insurance Contributions Act, you as an employer will be expected to make contributions to programs like Social Security and Medicare. These contributions are deducted from your employees’ wages.

The amounts for these programs vary. You’ll need to check in with the IRS to ensure you’re using the proper calculations for withholding.

There are also wage limits, so if an employee earns above a certain amount, they may not need to be taxed on what they earn above the limit.

Finally, employers are expected to provide a match, which means you’ll need to contribute the same amount from your own funds.

4. Laws around Paid and Unpaid Time Off

Global companies hoping to employ Americans should look out for regulations around paid and unpaid time off.

Generally speaking, the US doesn’t have much in the way of paid time off. The Fair Labor Standards Act (FLSA) doesn’t mandate any paid time off. The Family Medical Leave Act (FMLA) outlines certain medical conditions that entitle employees to 12 weeks of unpaid leave.

The US also recognizes 10 national holidays, but employers don’t have to offer these as paid days off.

5. Expertise Makes It Easy

If you’re expanding into the US market, consider getting a helping hand with American payroll to streamline your efforts. Like any other market, the American system has a number of unique regulations you need to be aware of. By working with the experts, you can avoid the most common mistakes and make payroll easier for everyone in your organization.

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Topics: Payroll

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