Do you know what the most common payroll mistakes are? Chances are, if you’re a new employee, you may not be aware of all of them. In this blog post, we will discuss seven of the most common payroll mistakes that employees make. By knowing what to avoid, you can ensure that your paycheck is correct and on time!
1. Not understanding the difference between taxable and non-taxable income
This is one of the most common mistakes made by employees. Taxable income is money that is subject to federal, state, and local taxes, while non-taxable income is not. It’s important to understand the difference so you don’t end up with a surprise tax bill at the end of the year!
Some common types of non-taxable income include:
- Interest from a savings account or CD
- Gifts and inheritances
- Child support payments
- Some types of unemployment benefits
Some common types of taxable income include:
- Wages and salaries from work performed
- Unemployment benefits that are paid because you were laid off (but not due to a disability)
- Interest earned at banks, credit unions, or other financial institutions where there is no federal deposit insurance
Remember, if you’re not sure whether something should be included in your tax return, it’s always best to err on the side of caution! Ask someone who knows more than you do about taxes before filing.
2. Forgetting to withhold taxes from your paycheck
If you’re a new employee, you may not think about withholding taxes from your paycheck. But if you don’t withhold them, then at the end of the year when it comes time to file your tax return and figure out how much is owed in taxes on all income earned during that period (including what was withheld), there could be surprises waiting for you.
It’s important to withhold the correct amount of taxes from your paycheck, and if you’re not sure how to do that, ask your employer for help. You don’t want to end up with a tax bill that’s larger than what you expected!
3. Not reporting all of your income on your tax return
If you’re a new employee, it’s important that you report all of your income on your tax return. This includes income from full-time jobs and freelance work as well as any other sources of earnings like savings accounts or investments in stocks and bonds (but not interest earned on them). If not reported correctly, you could end up with a tax bill that’s larger than expected!
4. Incorrectly calculating Social Security and Medicare taxes
Social Security and Medicare taxes are withheld from your paycheck. If you’re a new employee, it’s important that these withholdings are calculated correctly and not under- or over-withheld.
If they aren’t calculated correctly, then at the end of the year when filing your tax return there could be surprises waiting for you! For instance, you may end up owing more money than you expected in Social Security and Medicare taxes.
To avoid this, make sure to report any changes in your income or withholding allowances to your employer as soon as possible. And if you’re still unsure about how to calculate these taxes correctly, ask someone for help.
5. Not keeping track of overtime hours
If you work overtime, it’s important to keep track of the hours worked and be sure to include them on your time sheet. If not, you could end up with a surprise bill for back taxes owed on the overtime pay that was earned!
Keep in mind that not all employers are required to pay overtime wages. To find out if your employer does or not, ask them directly. And if they don’t pay overtime wages but offer incentives like paid time off instead, consider taking advantage of these benefits by working more hours in a non-overtime capacity (if possible).
This will also help you avoid overpaying taxes on any extra income earned through those incentives!
You also want to read the labour laws in the country carefully to be aware of your overtime rights and responsibilities.
6. Mixing up personal and business expenses
If you’re a new employee, it’s important to be aware of the difference between personal and business expenses. Mixing them up can lead to headaches when tax time comes around!
Personal expenses are those that are not related to your job, while business expenses are costs that are incurred as a result of doing your job. For example, if you buy a new laptop to use for work, that would be considered a business expense. But if you buy a new outfit to wear to your job interview, that would be considered a personal expense.
It’s important to keep track of all of your expenses throughout the year, and make sure to categorize them correctly. This will make filing your taxes much easier.
7. Failing to report tips or commissions as income
If you work in a job that involves tips or commissions, then it’s important to report this income on your tax return. Otherwise, you could get into trouble with the law and be fined for failing to pay taxes on the tip or commission money earned.
It doesn’t matter if your employer pays these wages directly because they are still considered taxable income. To make sure that you’re reporting all of your income correctly, keep track of all of your earnings throughout the year!
Especially when you work in Sales, calculating your commissions could get quite complicated. Get help from a professional Tax Advisor to make sure that everything is correct.
Failing to report tips or commissions as income can lead to fines with the law. Make sure to keep track of all your earnings throughout the year!
As a new hire, you might be wondering what to expect from your first few days on the job. Here are some of the most common payroll mistakes that employees make and how they can avoid them in their own careers. Check back soon for more updates about this topic – we have plenty of information coming up on how to get started with tasks like setting up direct deposit or adding deductions from paychecks every week! Stay tuned!
Leave a Reply