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I can still remember the day federal agents came through the door of my first small business to shut my company down. Apparently, I had not made the correct arrangements to remit the payroll taxes collected from employees, which are then forwarded to various government agencies. As an entrepreneur, I was unsure of how to make this happen. These federal agents quickly educated me on my mistake and I paid huge penalties to correct it. From this experience, I learned that no matter how few employees a company has, the owner should always use an outside payroll service. The process of doing payroll, and all the tax details surrounding it, is not something that an entrepreneur should be responsible for, particularly considering that most entrepreneurs are pulled in a thousand different directions every single day. Unfortunately, payroll is complicated. Federal, state, and local tax laws seem to constantly change. If you have employees in multiple states, this only becomes exponentially more difficult. In addition, small businesses have become a target for tax compliance. In fact, one third of all owners are penalized. Correcting any mistake is always costly. In addition, an owner is personally responsible for any tax liability owed by their company. In some cases, it is a federal crime. Got your attention?Here are the right questions to ask to choose the best payroll provider for your company: What is their reputation? Since the company will be handling your employees’ money, it is safest to choose a national company like Sage, ADP, Paychex or SurePayroll. If you decide to choose a local company, get good references and run a D & B credit report on the payroll provider. Be wary if your bookkeeper or CFO is insistent on using a specific local payroll provider. Can you file payroll over the Internet? The easiest way to file each payroll is by filling out reports on the provider’s website instead of having the service enter them by hand. The latter can yield transcription mistakes. Electronic reports can also be transmitted directly from your accounting system. Can they file payroll taxes in multiple states? With the virtual workforce increasing, many small businesses now need to file payroll taxes in many different states that have a variety of different rules. Do they connect with your accounting software? Once payroll is filed, how will that information for each employee get back into your accounting system for input into ongoing financial statements? Is the service provider report friendly? This is very important for employees. They should be able at any time to log in to the provider’s website and get their payroll information (especially around tax time). What else can the payroll provider track? Beneficial items include vacation time, overtime and retirement deductions. Again, if employees can track all that information from the payroll provider they will not come to you looking for it. Has your accountant worked with this payroll provider before? If they are familiar with their reports and the information they provide, any inquiries generated from government agencies will be easily resolved. Do they provide other human resource (HR) services? Most small business owners can’t afford to have an HR person on staff. The payroll company may be able to help with other employee issues. Finally, who is responsible for mistakes? What is the payroll service’s liability? Even if you have one employee, choose a payroll service. You don’t want federal agents showing up at your door.
For more information: http://goo.gl/OnixTf Sage, http://goo.gl/xuQVzX SurePayroll, http://goo.gl/iqjjFF
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