When was the last time you made an error on your company’s payroll? Think about the mistakes you’ve encountered over the years. Often, it’s not you who notices these errors; it’s usually an employee who brings them to your attention. In 2013, the IRS imposed nearly 7 million penalties, totaling over $4 billion. This significant amount represents a heavy financial burden on small businesses and startups, where such errors are more likely to happen.

Mistakes are easy to make, especially considering that there are over 15,000 tax codes in the United States, many of which are updated regularly—sometimes even daily. As a result, around 33% of small businesses and startups incur fines for incorrectly processed payrolls.

The primary reason for these mistakes is that companies manage payroll themselves without fully grasping the nuances and requirements necessary for proper execution. One of the most significant errors occurs when entrepreneurs misclassify employees as independent contractors, which often leads to a thorough audit by the IRS.

Another frequent issue arises when startups and entrepreneurs believe they can borrow from payroll taxes, including the amounts withheld for Medicare and Social Security that they are obligated to withhold on behalf of their employees. Using these funds to cover operational costs is a significant mistake, as this money rightfully belongs to the government—even if it remains in your account. Misappropriating or borrowing these funds is illegal.

Not all new businesses intend to misappropriate funds. If you’re a small or emerging company trying to grow, any mistakes you make are likely due to the overwhelming number of forms and tax filings you must complete. Additionally, various taxes need to be filed at different times and with different authorities, making it challenging to keep track of everything when you’re managing the process on your own. By “manually,” we mean without the expertise of an experienced accountant.

A survey conducted by GoDaddy reveals that over 46% of small business owners either don’t hire or outsource to an accountant. This is a serious oversight, considering the complexities involved in handling payroll correctly. Your time is better spent on marketing your business, selling your products, and growing your market share. After all, you didn’t start your business to spend your days behind a desk manually calculating payroll.

If you want to avoid being part of the 43% of small business owners who spend over three weeks each year managing payroll taxes, as reported in a recent Small Business Taxation Survey by the NSBA, investing in an accountant or payroll software is likely a wise choice.

According to Steve Johnsen, Compliance Lead at ZenPayroll, tax liability arises every time an employee is paid. Additionally, each state has its own filing frequencies, deadlines, and regulations. Some states only accept electronic filings, while others may impose a flat tax fee, a percentage, or a graduated rate.

This complexity can make it challenging to manage payroll while also addressing your business’s operational needs. Additionally, there are eight distinct payroll periods and two separate deposit schedules, with taxes needing to be paid within a specific timeframe after an employee receives their paycheck.

You don’t have to worry about falling into payroll pitfalls. With all the complexities involved, it’s clear why many businesses are shifting away from manual payroll calculations and opting for outsourced payroll processing through web-based solutions. Partnering with a payroll provider automates most of the process, reducing the risk of serious mistakes and allowing you to concentrate on more critical aspects of your business, like marketing and growth. Don’t let fines jeopardize your business. Invest in payroll services for accurate calculations and timely payments today.