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3 Common Payroll Mistakes Small Companies Make

January 30, 2012
  1. Do not question a W-4 that has not been altered unless the employee tells you that it is false — you can however advise someone who claimed too many exemptions that the IRS can issue a “lock-in letter” telling you how many exemptions the person must use, and that person will be stuck with these until the IRS notifies you otherwise.
  2. For exempt employees, you CANNOT substitute unworked time for paid time off, vacation or sick time unless you have a company policy that states so. For example, say an exempt worker requests a half-day off. You CANNOT deduct a half-day from the exempt employee’s pay, you CAN apply 4 hours of PTO or vacation time from the individual’s accrual bank if your written policy permits.
  3. Include expense reimbursements on an employee’s paycheck only if the amount appears on the pay stub as a separate item. Also, set up an earnings code for the amount so that it is not included in taxable wages.

From → IRS, Payroll, Tips

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