Payroll Penalties That Can Cost You Thousands (And How to Avoid Them)

Payroll mistakes don’t just frustrate employees—they can cost your business big money. Here are common penalties and how to avoid them:

1. Late Tax Deposits
The IRS charges penalties for late or missed payroll tax deposits.

2. Misclassification of Workers
Classifying employees as contractors to avoid taxes can trigger audits and back taxes.

3. Incorrect Forms
Errors on W-2s, 941s, or 940s can result in fines.

4. Missing Deadlines
Quarterly payroll reports have strict due dates—miss them, and you’ll owe penalties.

5. Recordkeeping Violations
Failing to keep payroll records for the required time can also result in fines.

Bottom line: Payroll compliance isn’t optional—it protects your business.