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

   • At a minimum, review your state and local tax settings in GoCo once a year to confirm correct withholding, unemployment rates, filing frequencies, and deposit schedules. For updating tax settings check out How to Access Embedded Payroll Tax Settings in GoCo
   • Make sure to also verify you have direct access to each payroll tax jurisdiction portal to allow real time monitoring of your accounts. 
2. Respond to Tax Jurisdiction Notices Promptly
   • If you receive a notice from a state or local tax authority (e.g., changes to unemployment rates or filing schedules), review your GoCo tax settings immediately.
   • Update the settings to reflect the changes or reach out for assistance.
3. 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
   • Attach a copy of the notice from the tax authority so our team can assist you quickly and accurately.

💡Pro Tip: Regularly verifying your settings and staying proactive with tax notices can save time, reduce stress, and eliminate penalties related to late filings or payments. GoCo Embedded Payroll makes it easy to stay on top of state and local tax compliance. 

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