The Most Common Payroll Tax Problems

If you’ve encountered problems with tracking and submitting payroll taxes in the past, you already know the penalties can be particularly tough on businesses. As an employer, you’re obligated to pay a number taxes for each of your employees. These taxes are deducted from the employees’ paychecks and held in your trust until you pay the taxes.

Ensuring you’re tracking these taxes so you can pay them accurately and on time is a critical part of your business’s success. These taxes include:

  • State income tax
  • Federal income tax (FICA)
  • Social Security tax matching (SSI)
  • Medicare tax matching
  • State and federal unemployment tax
  • Workers’ compensation tax

Staying on top of these payroll taxes can quickly turn into a full-time job. These are some of the most common problems you should be aware of when managing payroll taxes.


Employers can sometimes miscalculate the amount of taxes due from employees. When this happens, you either end up with an amount that’s higher or lower than what’s actually owed. When you take out too much from employees’ paychecks, it’s called overwithholding. When you don’t take out enough, it’s called underwithholding. Oftentimes, the mistake isn’t realized until it’s too late, making it much more difficult to spot without active measures in place.

If you withhold too much, you need to refund the employee in full or withhold less from future paychecks until you’ve corrected the problem. If you withhold too little, you need to withhold more money from future paychecks until you’ve withheld enough to fix the issue.


Another common payroll tax problem is miscalculating matching contributions. When matching contributions, it’s critical to ensure you’re matching the correct amount for each paycheck. In the event that you miscalculate matching contributions, you can rectify the mistake by following steps similar to those above.


Employers also encounter potential payroll tax issues when they incorrectly classify employee status. This can happen when full-time employees are misclassified as independent contractors or when exempt employees are classified as non-exempt and vice versa. Make sure you clarify the classification requirements for independent contractors versus full-time employees, so you don’t make the mistake of paying taxes for the wrong classification. Even if the misclassification is unintentional, expect to pay steep penalties. If misclassifications are found to be intentional, you could face criminal charges.


Have you encountered any of these problems in the past? At GJR Consulting, we’ve already helped hundreds of businesses identify and solve payroll issues, and we’re ready to help your organization find the right payroll tax filing solution. Get in contact with our team today, and we’ll get started immediately.