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How to Prepare for a Payroll Audit
Payroll compliance is not optional, and the penalties for getting it wrong are real. IRS failure-to-deposit penalties run 2-15% of the amount due depending on how many days late. State penalties stack on top. Back-pay liability for misclassified employees can run years deep.
This guide covers the compliance topic addressed in How to Prepare for a Payroll Audit and what employers need to know.
Why This Compliance Area Matters
Payroll compliance failures tend to compound. A wrong configuration in month one is wrong every month until corrected. When the correction comes, it often requires amended returns, corrected W-2s, and penalty abatement requests that take months to resolve.
Core Requirements
- Federal income tax withholding. Calculated from the employee's W-4. Must be withheld correctly each pay period and deposited on the IRS schedule.
- FICA (Social Security and Medicare). Employee and employer shares must both be remitted. Social Security is 6.2% employee + 6.2% employer; Medicare is 1.45% + 1.45%, plus 0.9% additional Medicare on wages over $200,000.
- State income tax withholding. Required in all states with an income tax. Multi-state employees require withholding in the correct states.
- Federal and state unemployment (FUTA and SUTA). Employer-only taxes. Rates vary by state and by experience rating.
- Quarterly and annual filing deadlines. Form 941 quarterly, Form 940 annual. State equivalents vary.
How to Stay Compliant Without Hiring a Specialist
The most cost-effective compliance path for businesses under 100 employees is managed payroll from a provider that monitors and applies compliance changes automatically. Tax table updates, minimum wage changes, state rule modifications, and new filing requirements are applied before they take effect -- without your management team needing to track them.
BEG managed payroll handles this continuously for clients at $25-$45 PEPM, all-inclusive.
Managed Payroll, Handled.
BEG manages payroll at $25-$45 per employee per month, all-inclusive. Get an instant cost comparison for your business.
Frequently Asked Questions
What does managed payroll cost?
BEG managed payroll runs at $25-$45 per employee per month, all-inclusive. For a 25-employee company, that is $625-$1,125 per month.
How quickly can you set up managed payroll?
Setup takes 3-5 business days from contract signing to first live payroll run. We handle the configuration, data migration, and tax account setup.
What is included at $25-$45 PEPM?
Payroll processing, federal and state tax deposits and filings, new hire reporting, direct deposit, year-end W-2s and 1099s, compliance monitoring, and off-cycle runs. All included.
Can you handle payroll in multiple states?
Yes. Multi-state payroll is a standard service. We register in each state where you have employees and handle state withholding and unemployment filing in all applicable states.
What happens if there is a payroll error?
If an error occurs due to our processing, we correct it at our cost. This includes amended returns, corrected W-2s, and penalty abatement where applicable.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries. BEG manages payroll at $25-$45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Wage and Hour Division
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