Get to know the reasons for heavy tax penalties against companies that fail to fulfill with tax or insurance regulations.
4. Calculation Errors for Taxes, Insurance and Benefits
4. Calculation Errors for Taxes, Insurance and Benefits

Tax filing is a natural extension of payroll. Governments expect timely, accurate reports and payments. Heavy tax penalties and interest are levied against companies that fail to fulfill with regulations.

An employer's federal tax liability can include: federal income tax, employee social security withholding/contribution, Medicare withholding/contribution, Earned Income Credit (EIC), and
Unemployment taxes (FUTA). There are also state and local income taxes and state unemployment insurance (SUI). Employers are required to withhold federal and state income taxes, as well as FICA taxes, from employee wages. These withholdings must then be properly deposited quarterly with the federal and state governments.

Disability insurance for non-job-related injury or illness, varies by state with employers paying the full amount in some states and employers and employees sharing the costs in other states. When disbursed, disability benefits are counted as taxable income for federal tax withholding, FICA and FUTA.

Insurance for on-the-job injury is often overpaid by employers. Since the basis of bonuses is payroll, companies must ensure that the payroll sent to the insurance company is correct. Many businesses exaggerate their payrolls including certain items which are excludable from the premium calculation such as tips, severance pay, premium overtime, third party sick pay, expense reimbursements, payments for active military duty, employer-provided perks, and limits on the wages of officers and inactive employees still receiving payroll. Small mistakes can add up to higher premiums.

Vacation, sick time, tuition reimbursement, travel allowances, COBRAS, pensions, and other employee benefits which depend on salary rate and/or accrual of hours can also affect the insurance premium rate.