![]() If the worker took vacation days or paid time off, verify that the human resources records and payments are correct. ![]() Pay rate: Verify the pay rates for salaried and hourly workers, including the overtime pay rate, if applicable.These steps confirm the existence of the worker. Both employees and independent contractors must complete a Form W-9 with a Social Security number or an Employer Identification Number (EIN). Worker’s employment: Confirm that you’ve collected a Form W-4 for the employee to ensure correct tax withholdings.Here’s the key payroll data you’ll want to look at: The first step in a payroll audit is to review employee payroll data. Encourage your workers to contact you if they are uncertain about their payroll information. Conduct the audit by comparing these records:Įmployees can request a payroll audit of their data if they believe that an error took place. Payroll audits confirm the accuracy of the payroll records. This fraud happens when an employee adds a fake worker to the payroll records to collect the payments for themselves. You may also uncover a fictitious payee, or ghost employee, who does not exist. An audit can also help find people on your payroll who your company no longer employs. If not, you’ll have tax issues for workers who rely on your tax forms. When you issue 1099s and W-2s, they must be correct. You’ll need to confirm that the pay rate, vacation days, and paid time off benefits are accurate. You want to pay your workers accurately-and they need reliable payroll information to file a personal tax return. ![]() If you set up your payroll process correctly, you’ll be able to file returns and make deposits in a timely manner-avoiding fees and penalties. You will also have to make tax filings (and deposits) for Social Security, Medicare, and unemployment compensation programs. However, it's not just about ensuring you don't get in trouble with the IRS. The IRS and state departments of revenue require businesses to file accurate payroll tax returns and submit taxes withheld from pay. If you're a business owner, you understand the importance of paying taxes on time. Payroll audits can protect your business from legal and financial risks but also ensure you pay employees fairly.
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