Payroll Pitfalls: Common Mistakes That Can Cost Your Small Business

Payroll is one of those business tasks that looks simple—until you’re the one responsible for it. Between tax filings, employee classifications, and changing regulations, it’s easy for small errors to turn into costly problems. Here are some of the most common payroll pitfalls we see:

1. Misclassifying Workers Confusing employees and independent contractors can lead to back taxes, penalties, and re-filing headaches. It’s important to get worker classification right from the start.

2. Missing Tax Deadlines Payroll tax deposits and filings follow strict schedules. Missing even one deadline can trigger penalties or interest charges. Automating or outsourcing this process is often worth it for peace of mind.

3. Incorrect Pay Calculations Miscalculating overtime or withholding the wrong amount of tax can quickly create employee frustration and compliance issues. Regular audits of payroll reports help catch mistakes early.

4. Poor Recordkeeping From time sheets to W-2s, accurate documentation is essential. Without it, you may struggle to resolve disputes or verify compliance later.

5. Doing It All Yourself Many business owners try to handle payroll in-house to save money—but when errors happen, they can cost far more than outsourcing would have.

At Custom Business & Tax Solutions, we take payroll off your plate so you can focus on running your business. From direct deposits and W-2 preparation to tax payment coordination, we make sure every detail is handled correctly and on time.