Risks of Poor Employer Wage Reporting
Keeping poor employee wage records is a dangerous but perfectly avoidable situation. Generally, you will need to keep wage records, social security payment records, occupational safety insurance payment records, unemployment payment records and taxes paid. The penalties for failing to do so can vary from state to state. If state standards are more strict than the federal standard, such as designating a higher minimum wage, the state laws prevail.
As such, you need to be familiar with your state's regulations and the federal requirements to make sure you are in compliance with the law. There is no excuse poor record keeping as far as the government is concerned. It is your responsibility, as a business owner, to make sure these measures are carried out.
Businesses that fail to report wages properly face Department of Labor (DOL) penalties. When violations are caught, the Department will recommend changes and require any back payments due to employees to be paid. The DOL can also bring suit against employers for violations and request additional damages. The DOL can also have injunction issued preventing an employer from engaging in certain acts of business. Employers who violate minimum wage laws and overtime laws may be fined with civil penalties of $1100 per violation. Other options for DOL are fines, up to $10000 on the first incident. A repeat offense will result in a prison sentence.
Another thing that must be handled carefully and accurately are payments that need to be withheld from your employees. Unfortunately, if you do not handle this issue on time, the federal government always assumes you are illegally holding employee funds, even if you pay a partial payment. Both you and the employee often share contributions to such things as unemployment, Social Security taxes and of course, the Internal Revenue Service.
The penalties for these items are large and can run up to 100% of the amount owed. There is also interest involved from 2 to 10 percent. Furthermore, the IRS can seek payment personally from all of those people the employer employed who were supposed to do the job correctly. Of course, the IRS can also prosecute the company employees through the criminal system as well.
Most importantly, if you need to defend your self from a lawsuit or DOL/IRS review, with poor records you have a very poor change of having such an event come out in your favor. Furthermore, because your records are poor, if there is one lawsuit or DOL/IRS violation most of the time others soon follow.
One way to ensure your company manages wage reporting properly is to outsource payroll to a professional payroll company. Reliable payroll companies utilize the latest in payroll software, remain compliant with all tax laws and regulations, and keep accurate records of all transactions.
About the Author:
For over 30 years, ADS has provided quality payroll services to hundreds of clients throughout New Jersey, serving both the public and private sectors, always with an emphasis on superior customer service. http://adspayroll.com/
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