Red flags auditors look for when reviewing payroll procedures.

Charles Read, CPA, USTCP, IRSAC
Charles Read, CPA, USTCP, IRSAC
President/CEO GetPayroll
Find me on LinkedIn

When the State Unemployment Department* audits you, auditors are looking mostly for misclassifications, specifically employee and contractor misclassifications.

Auditors want unemployment taxes. The Federal Government (who funds them) prefers to have taxes withheld at the source – meaning by the business owner.

When taxes are withheld at the source, the proper reporting of that income is much higher than if it is not withheld at the source.

red flags auditors look for when reviewing payroll proceduresIf it is the Department of Labor (Federal DOL) auditing, it is likely that someone filed a Fair Labor Standards Act (FLSA) complaint about overtime. Auditors are looking to see if you have classified employees as exempt or non-exempt properly and paid overtime that was due.

If it is the Internal Revenue Service (IRS) in a tax audit, it is to ensure that the income was actually paid out. And, not a scam to hide income from reporting. On rare occasions, there may be an “Employment Tax Audit” by the IRS but they are very rare.

 

 

Interested in learning more about GetPayroll services? 

Are you shopping for new payroll services? Schedule a demo to see if GetPayroll is right for your business.

If you are a current GetPayroll customer (yay!), take a look at some of our new services that may help streamline your business operations.

 

*Each state has its own name for this department.

 

Comments and Suggestions

Don’t forget to leave us a comment below and tell us what you think. If you have any requests or suggestions, we’d love those too!

 

Leave a Reply

Your email address will not be published. Required fields are marked *