Mistakes Happen

Mistakes happen, no argument there. Whenever humans are involved, there are going to be mistakes. One “little” mistake can sometimes create a mountain of work to rectify and can be extremely costly – especially in the payroll world.

Let’s say that an employee was underpaid at the end of a calendar year. It is now 3 months into the following year and the error is discovered when the employee goes to file their tax return. What now?

Following are the steps that need to be taken:

  1.  Confirm the error was made and confirm the underpayment amount.
  2. Calculate the gross pay, deductions, and payroll taxes and pay the employee the net.  Does a portion of the amount need to be withheld and paid to the 401k provider?  (If so, those records will need to be revised and provided to the 401k administrator).
  3. Pay the taxes to the proper taxing authorities (Federal (941 and Futa), State (Withholding and UI), any local taxes.
  4. Complete and file a 941-X, 940-X, Revised State Withholding Return, and a Revised State Unemployment Return for the company (and local taxes if applicable).
  5. Prepare a W-2C for the employee.
  6. File the W-2C with the SSA and the State.
  7. Prepare for penalty and interest that will be incurred because of the late deposits on the taxes.

Yep, mistakes happen – but it sure is worth checking and double checking to avoid as many as possible!