Every year, as CPAs head into client review season, a predictable pattern emerges. Business owners begin pulling financial reports, CPAs begin preparing returns, and suddenly all sorts of payroll issues start bubbling to the surface.
Some are harmless.
Some are annoying.
And some — the ones CPAs dread — come with penalties, notices, and cleanup work that no firm really has time for.
The good news? Nearly all of these problems are preventable. And with the right visibility early in the process, CPAs can help their clients avoid compliance headaches before they begin.
Below are the five most common payroll red flags CPAs encounter this time of year, why they happen, and how you can get ahead of them with minimal effort.
If there’s one red flag CPAs recognize immediately, it’s a mismatch between payroll reports and tax filings. A business may think their provider “handles all filings,” but if tax agencies don’t receive them—or if the provider lacks proper authorization—problems surface quickly.
Late 941s lead to IRS notices, penalties, and interest—problems that often land on the CPA’s desk even though the CPA didn’t cause them.
Ask clients early:
“Has your provider confirmed all filings were accepted by the IRS and state agencies?”
Most business owners don’t know the answer. That’s where a quick review can prevent a long conversation later.
This is a silent killer in payroll. A company grows, hires someone out of state, or changes entity type, and suddenly their unemployment rate is wrong—or they never opened a state unemployment account at all.
Incorrect SUTA rates can cost a business thousands annually. And if the state never received proper filings, CPAs end up explaining the penalties.
Encourage clients to notify you before hiring in new states. A 10-minute discussion can avoid a 10-week cleanup.
This is easily one of the most common (and most overlooked) payroll red flags.
Employees are working remotely, moving states, or splitting time across multiple jurisdictions. Many payroll systems don’t automatically update work location rules, which leads to incorrect withholdings.
Remote work changed everything. Most SMBs have no idea that payroll setup—not accounting—is responsible for multi-state compliance.
When a client hires remotely or moves:
Assume the payroll setup is wrong until proven otherwise.
This one frustrates business owners, CPAs, and insurance brokers alike.
During year-end review, wage totals don’t match WC audit reports—or clients begin getting large premium adjustments.
Ask clients early:
“Has your payroll provider mapped each employee to the correct workers’ comp class code?”
Most of the time, the answer is no.
One of the biggest red flags CPAs see—often unintentionally—is when a client’s payroll activity clearly indicates they’ve surpassed the capabilities of their current provider.
A mismatched payroll system produces inefficiency, errors, and unnecessary CPA cleanup work.
A vendor-neutral evaluation — not a sales call from a provider.
CPAs are trusted advisors. When something goes wrong with payroll, the client often assumes the CPA can fix it, even when the issue sits squarely within the payroll provider’s setup or limitations.
That’s why having a resource you can call—someone who understands all payroll platforms and can diagnose where the breakdown is—makes a huge difference.
At Segura Gallo HR & Consulting, we act as a single, unbiased payroll partner for CPAs and their clients. We evaluate all major systems (ADP, Paylocity, Paychex, PEOs, etc) and determine whether the issue is:
CPAs stay in control of their client relationship, and clients get the right payroll solution without being pushed into a specific platform.
Payroll problems shouldn’t be a surprise during tax season. With early visibility and the right partner, CPAs can help clients avoid penalties, reduce complexity, and spend more time advising—less time troubleshooting payroll.
If you’d like help reviewing a client’s system or identifying red flags before they become issues, I’m always happy to assist.
