Receiving a notice of a payroll audit can be intimidating, but it doesn’t have to be a crisis. Being prepared is the key to a smooth process. Here’s what to expect and how to get ready.
Table of Contents
- Why Was I Audited?
- What Will the Auditor Look For?
- How to Prepare for a Smooth Audit
- The Best Defense?
Why Was I Audited?
Audits can be random, or they can be triggered by discrepancies—like a mismatch between your tax filings and W-2s, an employee complaint, or consistently late deposits. Don’t panic; see it as a routine check-up.
What Will the Auditor Look For?
The auditor will want to verify that you have properly paid employees, withheld the correct taxes, and complied with labor laws. Be prepared to provide:
- Payroll registers and journals for the audit period.
- Employee timecards or timesheets.
- Copies of Form W-4 and I-9 for all employees.
- Bank statements showing tax deposits.
- Records of contractor payments and copies of 1099 forms.
How to Prepare for a Smooth Audit
- Don’t Delay: Respond to the audit notice promptly and gather your documents as quickly as possible.
- Get Organized: Have all your records sorted by employee and by pay period. Digital records are much easier to search and provide than paper boxes.
- Be Cooperative but Cautious: Answer the auditor’s questions honestly and provide only the documents they request. It’s often wise to have your accountant or payroll provider assist you.
- Learn from the Experience: Use the audit as a learning opportunity to identify and fix any weaknesses in your payroll process.
The Best Defense?
The ultimate way to prepare for an audit is to use a professional payroll service. They maintain pristine, organized digital records of every transaction and tax filing, making it easy to pull the required reports at a moment’s notice.
Stay Audit-Ready
Audit-proof your payroll with perfect records. Partner with Payroll On The Money for a system that keeps you prepared.