A survey by SurePayroll, included in its 2020 Payroll and Taxes Regulations Report, revealed some surprising findings regarding how well small business owners understand payroll regulations and the mistakes they make when running payroll for their employees.
One of the most noteworthy is that 45% of respondents claimed to be familiar with regulations that don’t even exist. Another, only 45% provide their employees with W-2 forms, despite this being required by federal law. Other survey statistics include:
- Only 36% of small business owners indicated familiarity with the Federal Insurance Contributions Act (FICA), the law that mandates tax contributions for Social Security and Medicare;
- 42% said they use internal DIY payroll tax solutions rather than a software system;
- 24% say they spend more than four hours a week on payroll each month.
SurePayroll Compliance Survey
Even worse, more than 30% admitted to having made a payroll mistake once — most underpaid an employee — and it took 56% of owners longer than 24 hours to fix a payroll mistake.
Overlooking payroll requirements or tax regulations, combined with the time needed to run payroll and use of do-it-yourself systems, can not only result in costly mistakes but also fines and penalties, leading to potentially devastating results, according to the report.
“While only 8% of survey respondents say they have been fined for failure to comply with payroll, 52% of those that have say the fines resulted in a need to cut department budgets and 31% said they were forced to let an employee go,” the report stated. One in ten respondents said they would not be able to pay a fine or penalty of any size.
Starting a small business can be an exciting but also overwhelming venture, with payroll
often a major contributor to that stress, the report emphasized. To avoid errors, it recommended that small business owners consider using an automated payroll system. It listed five questions business owners should ask when reviewing prospective vendors:
- Will my payroll taxes be filed accurately and on time?
- What happens if I receive a notice about my payroll taxes?
- What is the standard payroll processing window?
- Am I required to sign a contract?
- How available is your customer service?
SurePayroll surveyed 500 of America’s smallest business owners (those employing fewer than 20 employees) in late 2019 before COVID-19 arrived in the U.S. Its goal was to learn how much time they spend on payroll, how often they make mistakes, and how well they understand state and federal payroll tax regulations.
The company included the survey findings in its 2020 Payroll and Taxes Regulations Report, The Hidden Impact of Payroll. You can download the full report for free to view the entire list of survey results.
Image: SurePayroll
This article, “45% of Small Business Owners Familiar with Payroll Regulations that Don’t Exist” was first published on Small Business Trends