CPA Practice Advisor

SEP 2018

Today's Technology for Tomorrow's Firm.

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22 SEPTEMBER 2018 ■ www.CPAPracticeAdvisor.com THE PAYROLL CHANNEL How to Avoid Payroll Fraud By Mike Kappel, CEO, Patriot Software Although there’s no way to guarantee that employees won’t commit payroll fraud, you can take measures to prevent it or catch it quickly. Set up controls to protect your company from payroll fraud and other kinds of small business fraud cases. Here are some things you should do to secure payroll at your business. 1. Establish checks and balances If you pass along responsibilities to employees, make sure you don’t entrust everything to one employee. Different staff should set up new hires, process payroll, and handle accounting. And, you should have more than one employee doing each task. Keep an eye on employees who have access to account numbers and payroll checks. These employees could fabricate ghost employees and falsify wages. And pay close attention if you only have one employee who handles payroll. Don’t allow payroll staff to generate their own paychecks. 2. Ask employees to report suspicious behavior The recent study (https://bit.ly/2woXnOH) found that whistleblowers are the most common and effective way that employers discover fraud in the workplace. Establish an anonymous method for tips and clear steps for reporting suspected fraud. You might not be able to see every detail that goes on in your business, but employees are most likely in a better position to spot payroll fraud red flags. 3. Conduct internal audits An internal audit is when someone working within your company checks your business’ finances, operations, or management. You can conduct internal audits at random times to catch employees off guard. The audit looks at financial records to find where money is going, helping to find gaps in records. 4. Create a separate payroll account Keeping all your business funds in one bank account might be an invitation for fraud. A payroll account lets you separate your payroll funds from your general business funds. This way, you will only put enough money into the payroll account to cover employee wages and taxes. Using a payroll account also makes it easier to reconcile your bank statement and maintain accurate records. 5. Make sure payroll tax deposits are being made Because an employee running payroll might be pocketing taxes, it’s important that you verify that correct tax deposits are being made. Log in to EFTPS periodically to make sure that accurate, timely deposits are being made and also review tax filings to make sure your deposits add up. 6. Do your due diligence before you hire Obviously, no business owner intentionally hires employees with fraudulent behavior. But you need to do your due diligence before you extend a job offer. Make sure you do reference checks. Talk with the candidate’s previous employers. Find out about any suspicious behavior or even past instances of payroll fraud. Do a thorough background check to see if the candidate has a criminal record. Require drug and alcohol screenings as well. ■ LATEST PAYROLL NEWS California Considers Ban on Mandatory Arbitration. The #MeToo-driven bill would ban California employers from requiring workers to sign arbitration agreements. www.cpapracticeadvisor.com/12426414 High Income Wage Earners Need to Review Their W-4. The Tax Cuts and Jobs Act made major changes to deductions, exemptions, the CTC, tax rates and brackets. www.cpapracticeadvisor.com/12425546 Xero and Gusto Partner for Payroll. New partnership that will allow Xero users to have integrated access to Gusto’s full-service payroll solution. www.cpapracticeadvisor.com/12425145 Missouri Voters Strike Down “Right to Work” Law. Unions are celebrating Missouri voters’ decision in August to strike down a state “right-to-work” law. www.cpapracticeadvisor.com/12424668 Retailers Already Competing for Seasonal Workers. Major retailers are already posting help-wanted ads for their busy season, weeks or even months earlier than usual. www.cpapracticeadvisor.com/12422565 THIS MONTH'S TOP PAYROLL SOCIAL MEDIA POSTS ■ What to Expect from a Nanny Payroll Provider. The SurePayroll blog. https://bit.ly/2wnXavG ■ 5 Time Tracking Compliance Issues and How to Avoid Them. PrimePay blog. https://bit.ly/2PKmvYI ■ How to Manage a Cafeteria Plan. Paydays Made Easy blog. https://bit.ly/2PLL3k5 ■ Preparing Your Business for a Payroll Tax Audit. Cirrus Payroll blog. https://bit.ly/2BX17gg ■ Should Your Payroll Go Paperless? Zenefits blog. https://bit.ly/2PL8aLG

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