One of the biggest challenges small business owners have to contend with is time. To be more precise, how little of it there is. And according to a new survey and report from QuickBooks Payroll, owners are spending almost 5 hours (4 hours and 52 minutes) calculating, filing, and paying payroll taxes each pay period. As a matter of fact, it comes out to 21 days a year.
Payroll Tax Statistics
Whether the pay period is weekly, every two weeks or monthly, that is a lot of time. Considering the resources small businesses have at their disposal, it’s time they would rather be spending doing something else. So, it’s not surprising more than a third (35%) of owners say it’s an issue they are most concerned about.
Unfortunately, business owners don’t realize just how much time they spend on payroll taxes. This is the case for 63% of the respondents. Furthermore, 65% say they wish they could outsource payroll completely, with another one third stating they are not comfortable with the payroll process at all.
QuickBooks Payroll commissioned Kelton Global to survey 1,006 U.S. small business owners in November 2019. This is part of QuickBooks’ collection of resources including articles, videos, and tools to help small businesses hire employees and run payroll.
The survey reveals more small business owners are taking on the financial activity of their business. Almost 9 in 10 or 86% take on at least one financial activity. This includes processing employee payroll and calculating payroll taxes.
Considering 79% of owners also say they find it hard to stay on top of payroll tax, mistakes can quickly get out of hand. Moreover, 7 in 10 say different labor laws across cities and states make things harder. And without the expertise to properly address these changes, owners can find themselves answering to the IRS.
Consequently, 1 in 4 of the businesses in the survey has come under the scrutiny of the IRS. The result of this scrutiny is 15% were audited and 17% were fined, while 40% of businesses with more than 10 employees were audited or fined.
There are many reasons for mistakes owners make when processing their payroll. In order to ensure they don’t make mistakes, 82% say they review their process manually, which can result in more errors depending on the complexity.
Bearing in mind owners in the survey who do payroll themselves describe the process as confusing (44%), complicated (47%) and frustrating (49%) manual processes are more likely to result in more mistakes.
Automation in Payroll
There is a concerted effort being put forward by the IRS and other public and private organizations to simplify taxes. The recent launch of a new tool to help small businesses calculate income tax withholding from the IRS is such an example.
Companies in the industry are also creating products to make the process more manageable for small business owners. And key amongst those solutions is automation. This is because there are many repetitive tasks owners have to perform throughout the years.
For example, if an owner is paying employees weekly it means doing payroll taxes 52 times a year. In the survey, 38% say they process payroll weekly, while another 42% do so every two weeks. And the amount of time they spend on it is as follows: calculating payroll taxes – 110.52 minutes and filing payroll taxes – 96.3 minutes.
Automation can dramatically help reduce the time and more importantly costly mistakes. And as the survey points out, owners know the benefits of using automation tools.
They say it gives them peace of mind, saves them money, and they trust it will be accurate just to name a few of the benefits.
Choosing the Right Solution
The key to making the solution you choose work for you is doing your due diligence. After all, this is the tool are going to be using to process your payroll.
Take your time, research, ask your fellow small business owners, and before you commit try it out.
This article, “Payroll Taxes Take up to 5 Hours Per Pay Period for Small Business Owners” was first published on Small Business Trends