Common Payroll Tax Filing Errors and How to Avoid Them

Payroll tax filing can be complex, but avoiding common mistakes ensures compliance and prevents costly penalties. Below is a list of common payroll tax filing errors, how to avoid them, and impact of untimely resolutions.

Incorrect Employee Information

Employee information changes often—whether it's a new address, a name change due to marriage, or adjustments to their W-4 withholding. These updates, while small, can significantly impact payroll taxes and compliance.

Common Scenarios That Require Updates

• Change of Address: State and local taxes may be affected when an employee moves to a new location. Even if an employee remains in the same state, there could be implication to local and special taxing authorities. 
• Name Changes: Marriage, divorce, or legal name changes must match IRS records to avoid W-2 errors. 
• W-4 Updates: Adjustments to tax withholdings can change the amount of federal or state taxes deducted. Marriages, addition of dependents, and other life events warrant an employee's review of their W-4 elections. 

The Importance of Timely Reporting

It’s essential to maintain open communication with your employees about reporting changes as soon as they occur. Delays in updating this information can lead to:

• Tax Filing Errors: Incorrect information can cause mismatches with the IRS and state agencies.
• Underpaid or Overpaid Taxes: Employees may owe additional taxes or face refunds delays.
• Penalties and Interest: Corrections and amendments due to untimely updates can result in costly penalties for both the company and employees.

How to Prevent Errors

• Regularly remind employees to report changes, such as through annual check-ins or payroll reminders.
• Use GoCo to streamline the process of updating personal and tax information. If you are collecting updating information from the employee, you can follow How do I update employee information or direct employees to How do I view & edit information in my profile?
• Verify records during year-end payroll reviews to ensure accuracy before filing W-2s and tax forms. 

By encouraging proactive reporting and utilizing GoCo's tools, you can minimize errors, avoid penalties, and ensure payroll taxes are accurate for your business and employees.

💡Tip: Make it part of your onboarding and ongoing payroll process to educate employees on the importance of keeping their information up-to-date!

Errors with State or Local Taxes

Each state and locality may have unique tax requirements, such as withholding rates, unemployment rates, and filing or deposit frequencies. Overlooking these details can result in costly errors, amendments, penalties, and interest.

GoCo helps you stay compliant by keeping up-to-date with state and local tax regulations. Here’s how you can ensure accuracy and avoid errors:

1. Verify State and Local Tax Settings Regularly

• Review your state and local tax settings in GoCo at least once a year to confirm:
  • Correct withholding rates.
  • Unemployment tax rates.
  • Filing frequencies.
  • Deposit schedules.
• For guidance on updates, check out How to Access Embedded Payroll Tax Settings in GoCo.
• Ensure you have direct access to payroll tax jurisdiction portals to enable real-time monitoring of your accounts and promptly address any discrepancies.

2. Address Missing TPA Access

• Missing Third-Party Administrator (TPA) access can lead to errors in tax filings and account management.
  • What is TPA Access? It allows GoCo or other payroll providers to file and manage taxes on your behalf.
  • How to Check: Verify with each tax jurisdiction that GoCo has been granted TPA access. If TPA access is missing, the system may be unable to file or deposit taxes correctly.
  • Fixing TPA Access Issues: Reach out to the tax jurisdiction and update GoCo with the necessary permissions.

3. Respond to Tax Jurisdiction Notices Promptly

• If you receive a notice from a state or local tax authority (e.g., changes to unemployment rates, filing frequencies, or penalties):
  1. Review your GoCo tax settings immediately.
  2. Update your settings to reflect the changes or reach out for assistance.

4. Get Support When You Need It

• • If you’re unsure about a tax notice or need help making updates, contact GoCo Support immediately:
    • Email: support@goco.io
    • Include a copy of the notice from the tax authority to ensure quick and accurate assistance.

For any additional questions, please reach out to us at support@goco.io 💚