As a dental practice owner, you have a lot of responsibilities on your plate. One of the most important is managing your payroll. However, payroll in the dental industry can be tricky to navigate. There are many unique considerations you need to keep in mind, from calculating overtime pay to managing employee benefits. If you’re not careful, mistakes with your dental payroll can be costly. They can result in fines, legal issues, and unhappy employees. Plus, they can take a lot of time and effort to correct, which can be a major headache.
That’s why it’s so important to understand the most common dental payroll mistakes and how to avoid them. In this blog post, we’ll walk you through everything you need to know, from calculating employee pay to filing taxes.
Common Dental Payroll Mistakes
Managing payroll for a dental office can be more complex than anticipated, with small errors potentially leading to significant mistakes. It’s crucial to be aware of common errors to avoid them, including issues like paying employees the incorrect rates, misclassifying employees, and failing to keep proper payroll records. Here are the most common dental payroll mistakes that can occur.
Not Paying Employees the Right Rates
One of the most common dental payroll mistakes is not paying employees the right rates. This can occur when a team member is hired, given a raise, or there is any kind of adjustment in pay. It’s crucial to ensure that the pay is correctly logged into your system. When using an hourly wage to calculate a salary in a program, rounding errors can occur. Always double-check the pay rates to avoid manual errors that can result in owing back-pay and other future issues.
Misclassifying Your Employees
Properly determining a worker’s status as an employee or independent contractor is critical, as it determines whether they are subject to tax withholding. The main difference between W-2 and 1099 workers is the amount of control you have over them, so ensure to view the IRS tests. Even if someone is brought on as a 1099 worker, it’s important to reassess their role over time, as their classification may change if their role as a contractor evolves. Misclassifying employees, even unintentionally, is a top payroll mistake to be aware of due to its steep financial consequences, including a $50 fine for each Form W-2 not filed on an employee, a penalty of up to 3% of their wages, plus up to 40% of the FICA taxes not withheld from the employee and up to 100% of the matching FICA taxes that should have been paid.
Using the Wrong Employee Information
It’s important to have accurate employee data when processing payroll, including name, address, date of birth, hourly rates, bank account information, and W-4 filing data. It’s also important to remind employees to update their information and make sure it stays correct. If your payroll partner offers self-service capabilities, employees can log in to provide updated information like a change of address or withholding amounts.
Not Handling Garnishments and Child Support Correctly
When garnishments such as child support or tax levies need to be collected from an employee’s salary, it’s important to ensure that they are being withheld and submitted properly according to remittance instructions. If a payroll service is being used, it should be notified so that the garnishment can be withheld and remitted to the appropriate authority. Even if an employee requests that a child support garnishment be stopped, it’s best to continue withholding until written authorization is received, as rules regarding this issue vary by state.
Processing Your Dental Payroll Late
Processing payroll late can have serious consequences for your dental practice. Late payroll can result in unhappy employees who may experience financial difficulties due to delayed payments. This can lead to a decrease in employee morale and productivity, which can ultimately impact the quality of care provided to your patients. Moreover, late payroll can cause problems with the IRS and other government agencies, leading to legal issues and potential fines. These fines can be costly for your practice and can be avoided by ensuring that you establish a strict schedule for processing payroll and ensure that it is always completed on time. It’s also important to communicate with your employees regarding payroll schedules and any potential delays. By prioritizing timely payroll processing, you can ensure that your employees are paid on time and in compliance with all relevant regulations.
Not Keeping Track of Gifts & Bonuses
It’s important to keep track of all gifts and bonuses given to employees in order to avoid payroll mistakes. Failing to do so can result in incorrect tax filings, which can lead to costly fines. Additionally, not keeping track of gifts and bonuses can cause issues with employee morale and retention. Employees may feel undervalued or unfairly treated if they do not receive the bonuses or gifts they were promised. By keeping accurate records of all gifts and bonuses given, you can ensure that your employees are happy and that your payroll stays on track.
Failing to Keep Proper Dental Payroll Records
As an employer, it is important to maintain certain payroll records for at least 3 years and documents on which wage computations are based for 2 years as required by state and federal regulations. This includes documentation about an employee’s work and time schedules and additions to or deductions from wages. Some states may have even longer requirements, such as New York’s requirement for employers to keep more in-depth payroll records for 6 years. It is crucial to set up policies for your company and proper storage guidelines to ensure compliance with the record-keeping rules.
Not Keeping a Fixed Schedule for Your Dental Payroll
Not having a fixed schedule for your dental payroll can be a huge mistake that can cause major headaches for both you and your employees. Processing payroll late can result in unhappy employees who may experience financial difficulties due to delayed payments. This can lead to a decrease in employee morale and productivity, which can ultimately impact the quality of care provided to your patients. By establishing a strict schedule for processing payroll and ensuring that it is always completed on time, you can avoid these issues and ensure that your employees are paid on time and in compliance with all relevant regulations. Additionally, it’s important to communicate with your employees regarding payroll schedules and any potential delays to maintain transparency and trust.
Submitting the Wrong Tax Forms
Submitting the wrong tax forms is another common mistake to avoid when it comes to handling your dental payroll. It’s important to understand which tax forms are required for your employees and to make sure that they are filed accurately and on time. Failing to submit the correct tax forms can result in fines and legal issues, as well as headaches for both you and your employees. It’s important to stay up to date with any changes to tax regulations and to consult with a tax professional if you have any questions or concerns.
Not Making 401k Contributions in a Timely Manner
If your company offers a 401(k) plan, it’s important to make timely contributions. According to the IRS and Department of Labor rules, deposits should generally be made as soon as possible after withholding the money from an employee’s wages, with the latest deadline being the 15th business day of the month after the contributions are withheld. Otherwise, penalties could be incurred. To avoid mistakes related to untimely 401(k) contributions, establish a procedure that requires elective deferrals to be deposited with or after each time you run your dental payroll. If any deferral deposits are late because of vacations or other disruptions, make sure to keep a record of why.
Let Quantum Dental Accounting Help You Handle Your Dental Payroll
Dental payroll is crucial to the success of your dental practice, and mistakes can be costly. By understanding the most common mistakes and taking steps to avoid them, you can ensure that your employees are paid accurately and on time, while also keeping your practice in compliance with all relevant regulations.
At Quantum Dental Accounting, we understand the unique challenges that dental practices face when it comes to managing payroll. Our team of experts has years of experience working with dental practices of all sizes, and we can help you streamline your payroll processes and avoid costly mistakes.
Contact us today to learn more about how we can help you handle your dental payroll needs.