Can You Afford Not to Be in Compliance?
Maintaining compliance for all tax and employment situations isn’t easy. It takes investing in the right resources, programs and technology to meet the ever-changing regulatory and employer demands. Yet, the costs of being out of compliance can be far greater and with more lasting consequences for companies.
At CIC Plus, hundreds of organizations have come to us proactively to manage a variety of employee compliance needs and improve the employee experience. Yet, some experience firsthand the cost of time-consuming audits…or worse before coming to us for help.
Here are a few pitfalls of poor compliance to avoid:
1. Government Penalties: With all the changing regulations—not to mention needing to navigate numerous differences in state requirements—it’s easy to fall into noncompliance, gaps that can quickly add up to significant penalties if you aren’t careful.
The increased attention in Washington on immigration laws is resulting in companies seeing more scrutiny of I-9 practices. Fines for I-9 violations nearly doubled in 2016 and audits also are on the rise. Events planning company Hartmann Studios was hit with a $605,250 fine for failure to fully complete proper I-9 paperwork for more than 800 employees. Meanwhile, Golden Employment Group was fined $210,000 for more than 400 I-9 violations.
Companies also learned the hard way how to navigate the complexities of the Affordable Care Act to meet reporting requirements to the IRS and employees. At stake were fines up to $500 per employee with a maximum fine of $3 million per company.
More familiar to most HR and Payroll organizations are potential penalties for improper collection of employee information or failure to deliver required statements on time.
• An Indiana employer was found in violation of state regulations for not collecting the right information on employees’ W-4 forms.
• Employers who maintain offices in multiple locations also need to pay close attention to state regulations, such as the California pay statement guidelines that require certain information to be included with every pay statement. Failure to comply can lead to penalties of up to $4,000 per employee, depending on the length of time of the mistake.
• During the year-end process, delays in sending employees their year-end tax statements by the January 31 deadline can lead to fines of $250 per violation.
These are a few of the key compliance areas that should be managed with defined processes and monitored closely with regular internal audits to help ensure you avoid potential fines.
2. Audit Costs: If you do fall into noncompliance, you may find yourself open to an audit. Audits can be lengthy, costing valuable time and employee resources to prepare and manage the audit, not to mention the opportunity cost of resources who aren’t able to focus on your actual business priorities. Additionally, audits can open your company up to other potential compliance issues that are discovered during the audit process.
3. Employee Impact: When either an employee or an employer files incorrect tax withholding information, the impact may not be realized until tax season, leading to consequences for you and your employees. Other compliance issues could lead to potential employee lawsuits as well.
4. Company Reputation: Direct costs of poor compliance can be expensive, hurting your bottom line, but indirect costs matter as well. Find yourself involved in employee lawsuits or subject to heavy government fines and the media exposure can be damaging to your company’s reputation. Bad PR is not a good look when you’re working to recruit new employees and attract new customers.
Stay on Top of Compliance
The complexity of employer compliance today suggests you should have dedicated resources to manage your compliance program. Many companies also turn to a compliance management provider who can automate the collection, management and delivery of employee information and ensure you avoid any costly compliance pitfalls.