Payroll is one of the few areas where a small mistake turns into a penalty fast. A late deposit, a missing form or an old wage rate can cost more than the payroll itself.

The taxes you withhold from paychecks aren’t your money. The IRS treats them as funds held in trust for your employees, and New York adds its own wage and notice rules on top of the federal ones.

Payroll mistakes rarely stay small.

These are the payroll mistakes we see most often with small businesses.

The IRS charges a failure-to-deposit penalty that grows with time: 2% if you’re 1–5 days late, 5% at 6–15 days, and 10% after that. It reaches 15% if the tax is still unpaid 10 days after the first IRS notice (IRS). Know whether you’re a monthly or semiweekly depositor and put the dates on a calendar.

Calling someone a contractor doesn’t make them one. The IRS looks at behavioral control, financial control and the type of relationship (IRS). If you set the hours, supply the tools and the work is central to your business, that person is likely an employee. Misclassification can leave you owing the employment taxes you didn’t withhold.

New York’s minimum wage rose to $17.00 an hour on January 1, 2026, for Long Island, New York City and Westchester, and $16.50 for the rest of the state. Starting in 2027, increases will be tied to inflation (FOX 5 NY). Check your rates every January, along with the overtime exemption salary threshold.

Under the Wage Theft Prevention Act, New York employers must give each new hire a written pay notice and include required details on every pay stub. Missing paperwork can lead to penalties even when the pay itself was correct.

Under the 2025 federal tax law, employees can deduct qualified overtime and tips through 2028. Your payroll records need to show those amounts clearly so your team can claim the deduction.

QuickBooks Desktop 2023 was discontinued on May 31, 2026. Payroll subscriptions on that version stopped working, and tax tables are no longer updated (Intuit). If you’re still on it, your paychecks may be calculated with old rates.

Payroll shouldn’t keep you up at night. Talk to us about handling it for you.

This article is for general information only and isn’t legal or tax advice for your specific situation.