A Payroll Audit Checklist to Keep Your Business Compliant
Whether you’re an accountant or the owner of a business, conducting payroll audits can be extremely useful to ensure that your employees are being paid correctly and that your business stays compliant with employment laws and tax regulations. However, audits can seem like something that should only be conducted by qualified professionals with access to expensive software, making it difficult to understand what you need and how to conduct payroll audits on your own.
Fortunately, this guide will show you how to conduct payroll audits without the need for expensive software or any special training – all you need is time and attention to detail!
Preparing for the audit
- Understand the purpose of the audit and what the auditor will be looking for. This will help you know what documents to gather and prepare in advance.
- Gather all the relevant documentation, including tax forms, employee records, pay stubs, and time sheets.
- Organize your records so the auditor can easily find what they’re looking for. This will save you time and frustration during the audit process.
- Be prepared to answer questions about your payroll procedures and policies. The auditor will want to know how you handle things like overtime, vacation pay, and taxes.
- Know your rights as an employer.
What you’ll need
To conduct a payroll audit, you’ll need to gather a few documents and have a plan in place. First, you’ll need your most recent pay stubs and W-2 forms. You should also have your most recent tax return on hand. Next, you’ll need to create a list of all the deductions you’ve made from your employees’ paychecks over the past year. Finally, you’ll need to review your state’s labor laws to make sure you’re in compliance.
Now that you have everything you need, follow these steps to conduct a payroll audit
- Review your pay stubs and W-2 forms. Make sure that all the information is accurate and up-to-date.
What an accountant will look for
The accountant will look at your company’s payroll processes and procedures to ensure they are in compliance with state and federal regulations. They will also look at your payroll records to make sure that all employees are being paid correctly. Additionally, the accountant will review your company’s tax withholdings and deductions to ensure they are accurate.
Finally, the accountant will verify that your company is properly reporting its payroll information to the government. In order to stay compliant with IRS requirements, it is important for businesses to conduct a complete audit of their payroll practices every year.
Here are five things you should know about conducting a successful payroll audit
- Ensure employee time cards match up with the time card system;
- Verify hours worked by comparing timecards and individual pay rates;
- Compare payroll totals for each week or month;
- Verify each paycheck has been appropriately issued or withheld as required by law;
- Review any changes in personnel over the course of the year such as new hires or terminations. Conducting a complete audit of your company’s payroll practices can help you stay compliant with IRS requirements and provide peace of mind for you and your staff.
Appointments, meetings and interviews
If you’re thinking of conducting a payroll audit, you need to be prepared. Here’s a checklist of what you need to do to ensure your business is compliant
- Make an appointment with your accountant or bookkeeper to go over your records.
- Meet with your HR manager to discuss employee compensation and benefits.
- Interview your employees to get their feedback on the current system.
- Get quotes from different payroll providers. 5. Request quotes for other forms of employment verification such as ID badges, i-9 forms, W-4s and so on. 6. Send surveys to all employees in order to gauge how they feel about the company’s current practices and procedures. 7.
Working with your bookkeeper or accountant
If you have a small business, you’re probably used to doing a lot of things yourself. But when it comes to payroll, it’s best to leave the calculations to the professionals. Working with your bookkeeper or accountant will help ensure that your business is compliant with all the relevant laws and regulations. Plus, they can offer advice on how to improve your payroll process. Remember, any financial professional worth their salt will be able to guide you through this process.
Most businesses do some type of yearly audit of their payroll records. It’s important for a number of reasons first, it helps verify employee hours and compensation (and if there are any discrepancies); second, it helps in case you are audited by the IRS; third, employers need accurate records for calculating taxes and withholding funds for retirement contributions; fourth, an audit provides employees with additional information about how their time was spent at work.
If your company has employees in multiple states or locations who work in different types of jobs (for example, hourly workers versus salaried staff), make sure each person’s paperwork is separate from everyone else’s.