Payroll Services: The 1 Mistake That Gets Small Businesses Fined

Running a business is tough enough without the IRS breathing down your neck. But every year, thousands of small businesses across Long Island get blindsided by fines—and the root cause is often buried in their payroll.

In 2025, the economic landscape is putting even more pressure on business owners. The IRS and New York State have doubled down on enforcement, and one seemingly small payroll mistake can snowball into thousands in back taxes, penalties, or even audits.

The #1 payroll mistake? Misclassifying employees and independent contractors.
And unfortunately, it’s more common than most business owners realize.

The Cost of Getting Payroll Wrong

A Long Island business recently reached out to Sundack CPA after receiving a $9,800 penalty related to payroll taxes. Their mistake? A misclassified “contractor” who had been working 40-hour weeks for over a year—without proper tax withholdings. The business owner was shocked, and they’re not alone.

Small businesses often assume that hiring contractors saves time and money. But the IRS has strict definitions of what qualifies as an independent contractor. If you’re paying someone regularly, dictating their hours, and giving them the tools to work? Chances are, they’re legally an employee.

Why it matters in 2025:

• State and federal tax audits have increased post-pandemic

• Penalties for payroll violations can exceed $5,000 per worker

• Businesses in Nassau and Suffolk Counties are on the radar for labor misclassification due to recent regional enforcement

This is where payroll services in Long Island come into play—and why local expertise matters more than ever.

Understanding the IRS’s Payroll Classification Rules

The IRS uses three main criteria to determine whether someone is an employee or contractor:

1. Behavioral Control – Do you dictate how the work is done?

2. Financial Control – Do you control how and when they’re paid?

3. Relationship Type – Are benefits provided? Is the relationship ongoing?

If you’re unsure, the default classification should always be “employee.” Misclassifying to save money on payroll taxes isn’t just risky—it’s illegal.

Businesses searching for a reliable CPA near me often overlook the importance of this discussion. Payroll compliance isn’t about software—it’s about strategy.

Why Payroll Isn’t a ‘Set It and Forget It’ Task

The payroll platforms that flood your feed with ads won’t tell you this: They don’t review your classifications. They don’t verify that your sick leave policies comply with New York State mandates. And they definitely don’t warn you about W-2 vs. 1099 thresholds.

That’s why more business owners are switching to payroll services Long Island CPAs provide—especially those that include human review and real-time compliance.

Warning signs your current provider is putting you at risk:

• You’ve never reviewed employee classification rules

• You’re unsure if you filed your quarterly payroll tax forms correctly

• Your contractor list includes people working 30+ hours per week regularly

• You’ve had late payments for federal or state withholding

Integrated Payroll and Bookkeeping: The Game-Changer

Here’s where most small business owners drop the ball: they treat payroll, taxes, and bookkeeping as separate systems. But in reality, these areas are deeply interconnected.

When your payroll is handled in isolation, your books don’t tell the full story. That opens the door to:

• Budgeting errors

• Missed deductions

• Inaccurate financial reports

By investing in monthly bookkeeping in Long Island that includes payroll tracking, you ensure everything aligns—so you’re never caught off guard during tax season.

✅ Benefits of Integrated Payroll + Bookkeeping Services:

• Real-time expense tracking

• Automated tax form preparation (W-2s, 1099s, 941s)

• Audit-prepared reports

• Year-end reconciliation without extra fees

• One point of contact who understands your whole business

When you work with bookkeeping services in Long Island like those offered by Sundack CPA, you’re not just getting numbers—you’re getting insight.

Why Sundack CPA Is the Smarter Payroll Solution

Sundack CPA’s payroll services in Long Island go far beyond processing checks—they proactively identify risks, file accurate reports, and protect your business from costly oversights.

Real Business, Real Results: A Nassau County Example

A construction company in Nassau County came to Sundack CPA after being hit with a $12,400 bill from NYS Department of Labor. They’d been issuing 1099s to part-time workers with fixed shifts. After a thorough compliance audit, Sundack CPA helped them:

• Reclassify past workers properly

• Set up a compliant payroll system

• Avoid further penalties by restructuring payment schedules

• Build a long-term tax strategy with their CPA in Suffolk County office

Do You Really Need a CPA for Payroll?

Absolutely—especially in 2025. Why? Because the financial landscape is getting more complex:

• New IRS audit triggers are focused on small businesses

• State-level agencies are sharing more data than ever

• Penalties for late filings and underreporting are increasing

Having a CPA near you manage your payroll isn’t just convenient—it’s protection.

How Payroll Affects Business Credit, Lending, and Growth Potential

Most business owners view payroll strictly as a compliance issue—something you do to stay out of trouble. But in reality, your payroll process plays a much bigger role in your financial credibility, especially when it comes to growth.

Payroll as Proof of Stability

When applying for financing, investors and lenders want to see consistency in operations. Regular payroll runs, accurate tax filings, and integrated bookkeeping all signal that your business is well-managed. A clean payroll history shows:

• Timely tax payments

• Strong employee retention

• Predictable cash flow

• Professional back-office infrastructure

These details can be the difference between an approved loan and a declined one—especially in 2025’s tighter lending climate.

That’s why many business owners searching for a “tax accountant near me” should also be asking: Is my payroll set up to support funding, not just compliance?

Payroll & Entity Structuring for Real Estate Investors

For real estate investors, payroll isn’t always top of mind. But as your portfolio grows, managing assistants, property managers, and on-site contractors across different LLCs can become a logistical headache.

This is where CPA services in Long Island add serious value.

Sundack CPA helps real estate investors:

• Properly structure payroll across holding companies and properties

• Separate taxable income by entity to reduce audit risk

• Comply with NY labor laws for employees managing multiple units

• Ensure passive income doesn’t get mixed with active W-2 wages when staff are part-time across entities

By integrating payroll with monthly bookkeeping in Long Island, we make sure your real estate income, expenses, and employee oversight are in sync—and defensible if the IRS ever comes knocking.

Planning for Growth Starts with Payroll

If your business is growing, your payroll strategy needs to scale with it. Expanding from 1099 contractors to W-2 employees changes your obligations. Hiring remote staff triggers state nexus and multi-state compliance requirements.

Sundack CPA proactively prepares you for what’s next—not just what’s now.

Whether you’re a local business or a multi-entity real estate investor, your payroll isn’t just a backend task—it’s the backbone of your legitimacy.

Sundack CPA Serves Businesses Across All Sectors

Whether you’re a real estate broker issuing commissions, a salon owner juggling hourly staff, or a restaurant managing tip allocation—your payroll needs are not “standard.”

Here’s how CPA services in Long Island adapt to your industry:

💼 Medical Practices

• HIPAA-compliant payroll reporting

• Shift-based scheduling for nurses and admin staff

• Integration with health benefits and 401(k) contributions

🛠️ Contractors & Home Services

• Job costing and per-project payroll tracking

• Proper subcontractor 1099 reporting

• NY State compliance on workers’ comp and disability insurance

🏢 Real Estate Agencies

• Commission structuring

• Bonus and draw tracking

• Monthly reconciliation with closing statements

🏢 Real Estate Investors

• Payroll for property managers, maintenance staff, and leasing agents

• Tracking income distributions and project-based compensation

• Integration with bookkeeping to align cash flow, holding company expenses, and passive income reporting

• Support for managing multiple LLCs or investment entities under one payroll and bookkeeping strategy

🍽️ Restaurants

• Tip pooling and reporting

• Overtime tracking and reporting by shift

• Real-time labor cost analytics

🧑‍💼 Solopreneurs & Startups

• Owner’s draw vs. salary consultation

• Transition from LLC to S-Corp with compliant payroll setup

• Guidance on when to bring on W-2 employees vs. 1099 contractors

If you’re currently Googling “accountant near me,” pause. What you actually need is a payroll partner who knows your business model, your margins, and your exposure.

What Happens If You Ignore This?

Let’s be honest: The IRS doesn’t care if your bookkeeper forgot to check a box. They don’t care if your payroll provider “didn’t mention that rule.” When you’re audited, you’re liable—period.

And in 2025, businesses in Suffolk and Nassau Counties are under increased scrutiny. With so many pandemic-era tax credits now expiring, agencies are eager to recover funds through enforcement.

What ignoring payroll compliance could cost you:

• Late filing penalties: $50–$260 per form

• Interest on unpaid taxes: ~3–6% annually

• Additional audits for income, sales, and workers’ comp

• Reputation loss with banks and lenders

Fix It Before It’s a Problem

If this article hit a little too close to home, you’re not alone. The good news? It’s fixable—before it becomes a headline on your desk.

Whether you’re switching providers or setting up payroll for the first time, Sundack CPA can guide you through it all with confidence and clarity.

📌 What You Get with Sundack CPA’s Payroll Services:

• Human eyes on every classification

• Real-time tax compliance checks

• Integration with bookkeeping and tax planning

• Support from experienced CPAs across Long Island

• A proactive partner who sees around corners

Take Action Today – Avoid Regret Tomorrow

Still thinking, “I already have a system, I think I’m fine”?

That’s exactly what one local business owner said—right before being hit with a fine for back payroll taxes. Don’t be next.

👉 Click Here To: Book your Payroll Compliance Review with Sundack CPA
Get peace of mind before your next tax deadline.

Looking for an accountant near you who actually understands NYC & Long Island businesses?
Let’s make payroll simple, smart, and safe—together.