If you own a small business and write an employee a check, don’t forget to check in – with your payroll specialist, that is!
Failing to notify your payroll specialist of a check payment to an employee can have big consequences and prevent your specialist from doing their job. Let’s talk about why you should avoid that at all costs.
At CSI Accounting & Payroll, we’ve worked with small businesses for nearly 60 years. That means we’ve spoken to thousands of small business owners about running all payments through payroll, answering questions like:
- Why does my payroll specialist need to know about each check?
- What happens if I don’t tell my payroll specialist about a check?
- What kinds of employee checks do I need to tell my payroll specialist about?
What Your Payroll Specialist Does With Each Check
You should notify payroll every time you cut an employee a check.
Let’s be clear – this isn’t exclusive to working with us at CSI Accounting & Payroll. If you don’t have an in-house payroll specialist, you need to let your outsourced payroll provider know about employee checks.
Why is that? What does your payroll specialist even do with this information? Simple. It’s so an expert can determine whether or not it needs to be run through payroll. (Some things don’t need to be!)
When payments are properly handled through payroll, your payroll specialist makes sure your payroll taxes are paid and you have accurate records for tax reporting.
In the next section, we’ll talk about what could happen if you don’t report an employee check to your payroll provider.
What Happens if Payroll Doesn’t Know About a Check
What happens if you write a check – or many checks – to your employees, but you forget to tell payroll?
We’ve seen this happen with a client before. They got audited because they were missing payroll taxes, and the reason behind that was they were cutting checks to employees but failing to notify us. They ended up owing penalties and back payroll taxes.
Because the negligence was on their part, staying in payroll tax compliance was not our responsibility. We couldn’t have known what they didn’t tell us – and that’s why we want to share this cautionary tale. Don’t make the mistake that they made!
Which Employee Checks to Tell Payroll About
If you pay all of your employees by check every pay period, you probably do it through payroll (otherwise you’re breaking the law).
But what about other occasions when you might write an employee a check? Let’s look at some scenarios:
- Payroll running behind. You don’t get your payroll prep done in time, so you quickly write out checks for your employees. This isn’t ideal, but it’s okay (on occasion) as long as you let payroll know so taxes get handled properly.
- Checks for reimbursements. These can be taxable or meet an exemption, depending on the nature of the reimbursement and whether it meets IRS accountable plan rules. Let your payroll specialist know so they can determine their taxability.
- Holiday or “just because” bonus checks. Some employers issue these outside of payroll because they don’t see it as employee income – but it is. Report these to payroll, or you won’t be paying enough of your payroll taxes!
Call Your Dedicated Payroll Specialist Directly!
Now that you know why your payroll specialist needs to know about each employee check, what happens if you don’t tell them, and which checks to tell them about, are you ready to check out payroll services?
If so, please consider CSI Accounting & Payroll! That means no more waiting in a phone queue to talk to your specialist. 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 it’s like to work with us by clicking the image below:
