Every company is mandated by the government to provide a payroll. You could say that payroll is an integral part of any business operation since it states all of the employees’ salaries and when they should get paid.
The Internal Revenue Service and specific financial agencies in your country set the guidelines and requirements regarding employment tax and business owners should always comply.
This makes it highly important for you to acquire accounting services in Malaysia to ensure that your payroll is always precise and accurate.
That being said, why does it have to be 100% accurate? Read on to find out.
Every employee is assigned to render 8 hours of work per day (more in some companies, but for the most part, this is the set standard). Every country in the world has labor laws that every company should always comply with.
The U.S. Department of Labor, Wage, and Hour Division, for example, creates regulations that include minimum wage and overtime pay requirements, as well as conditions under which an employee will be classified as exempt or nonexempt, among many others.
In the event that the employer fails to comply with the wage and hour laws set by their government, they are required to pay the employee the hours that were not paid, as well as giving them certain penalties such as waiting time, liquidated damages, court fees, and reasonable attorney fees when needed. On top of that, they may also face criminal and civil penalties depending on the country they operate in.
One of the main reasons why payrolls should be accurate at all times is that the employees will have to file for their income tax during mid-April every single year.
In the U.S., an employee would use their W-2 form to file their tax return. This is the form that will show their taxes and earnings that are withheld for the year.
It will be their employers who will file their W-2 form with the Social Security Administration, which will then forward all of the information to the Internal Revenue Service.
Whenever the employee files for their tax return, the information will be based on their W-2 form and it might mean that they either break even, receive tax refunds, or even owe their agency.
Do you see the importance now? In the event that the information stipulated in their payroll doesn’t match the form, it could mean that the employee will face problems that they shouldn’t have in the first place.
In most countries, employers are required to withhold the employee’s social security tax, federal income tax, and Medicare tax from their wages. Furthermore, they are also required by some governments to match the contributions as well.
There are some instances where unemployment tax, local income tax, and disability insurance can be withheld. In addition, employers may be required to pay a job-training tax, as well as state unemployment tax too.
Failure to comply with withholding compliance guidelines may result in the agency filing a tax lien against the employee’s property and the employers may be subject to a criminal investigation. In other words, they may be referred for prosecution.