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small business taxes /
small business payroll /

Is My Payroll in Compliance With the IRS?

February 1st, 2024 | 6 min. read

By Bryan Cremeen

When you do your own payroll or you’re just starting payroll with the assistance of a payroll service, you may wonder if your payroll is following all of the rules.

The first thing that comes to mind is the federal government since it’s the largest authority that your payroll has to be in compliance with. 

When there are audits, penalties, and interest on the line, how do you know if your payroll is in compliance with the IRS?

CSI Accounting & Payroll has worked with small business payroll for over 50 years. We’ve gotten a lot of questions from small business owners about payroll compliance, such as:

  • What are the signs that I’m in compliance?
  • What payroll red flags do I have to watch out for?
  • How can CSI help me stay in compliance?

Blog - Is My Payroll in Compliance With the IRS

Signs of Payroll Compliance

How do you know if your payroll is in compliance with the federal government? Simple! No news is good news. 

If the IRS needs something from you, they’ll make sure you know it. Their warnings start small, then escalate as needed if you don’t respond. It starts with letters, then calls, then agents knocking on your door.

If you’re getting letters from the IRS, you should assume they’re real and read this article about what to do.

Red Flags in Your Payroll

What indications are there that your payroll might not be in compliance? 

Unless you’ve actively stopped paying your taxes or stopped filing your federal tax returns, you’re probably doing just fine! There are no government agents looking over your shoulder to make sure you’re in compliance. 

Read more about federal payroll compliance here (plus state and local compliance).

A lot of payroll doesn’t even fall under the IRS besides payroll taxes! You might actually be more worried about staying in compliance with the Fair Labor Standards Act (FLSA)

The FLSA largely regulates how minimum wage and overtime rules are applied, but it contains a bit more information, too. 

There is a federal FLSA (for businesses with $500,000 or more in annual sales), and each state also has its own FLSA. For each applicable rule, you need to follow the FLSA (either federal or your state’s) that favors the employee the most. 

How CSI Helps With Payroll Compliance

If you’re worried about payroll compliance while you’re doing payroll yourself, or you’re concerned with your current payroll provider and are thinking of switching, here’s how CSI Accounting & Payroll can help you.

A huge selling point with CSI is that a dedicated contact with us has significantly better employee retention than the big guys, so you won’t be passed from representative to representative

This dedicated contact closely reviews your first several payroll runs while you’re a new client and again whenever changes are made. We alert you to questionable things or things that are out of compliance, such as:

  • Pay rates below minimum wage
  • Incorrectly calculated Earned Sick and Safe Time (ESST)
  • Items missing from paystubs
  • Tipped employees with low or no reported tips
  • Misclassifying workers as independent contractors
  • Not using weighted or blended overtime calculations
  • Reporting too many hours in regular time instead of overtime

We can’t list every possible thing, but this is a pretty good start! Would having a dedicated payroll contact on your side give you some peace of mind?

Stay In Compliance With a Dedicated Payroll Specialist

Whether you’re worried about the IRS or state, local, or FLSA regulations, working with a quality payroll service can relieve a lot of those worries. 

Now that you know about the signs and red flags of payroll compliance, as well as how CSI can help alert you to them, are you ready to partner with us for payroll services?

To see if we can be a good fit for your business, click the button below for a free consultation:


Not ready to talk? That’s okay! First, learn more about what a payroll service costs by clicking the image below:

How much does a payroll service cost? Click here to learn more about the common and miscellaneous factors that make up a payroll fee.

Bryan Cremeen

Bryan joined CSI Accounting in 2019. He joined the team after CSI purchased his accounting firm, AccountSource LLC, which he had owned since 2005. He graduated from St. Cloud State in 2001 with a Bachelor's Degree in Accounting and has been an Enrolled Agent since 2010. Before owning his own accounting practice, Bryan had worked at the State of MN handling financial reporting and had been in private industry as a Controller. His primary responsibilities include overseeing the accounting department and making sure clients are receiving quality service. Fun Fact: Bryan has played soccer since the age of 4. He still plays soccer year round through various adult leagues and is an avid supporter of the Minnesota United MLS soccer team. COYL!!! (Come on, you Loons!!!)