Who Should Do My Payroll?

I remember when I was a kid, my Mom used to work as a bookkeeper for a hardware store. Those days of typewriters and manual calculators... still makes me smile... however today we have many tools that make payroll easy and quick. My two favorite ones are Peach Tree and QuickBooks. Both of them are well known software and both will let you keep track of earnings, deductions, etc. The best part: You don't really have to know exactly how it works. The software will compile all the information you and your employees need. All you have to do is keep record of the time each employee has worked.

Another option is to outsource your payroll, and there are many companies that will gladly do this for you. Most of them are very competent and if you are paying someone to do your payroll, the cost of outsourcing may be close to what you pay that employee.

Let's talk about the advantages of either one.

In house Payroll

You have total control of when and how you do it (always following the laws for your state) and you could save some money. The hardest part is to set up your software before you start doing payroll. You could divide this in two parts; Employees (employee's personal information, wages, deductions, garnished wages, etc.) and your Company (company information, FEIN, tax tables, frequency of payroll, etc.)

After you have done that, (and it is very important you do this part carefully since it will affect your employees pays as well as what you need to report on your taxes) it is just matter of entering the time each employee works in a given pay period, and print the checks.

The disadvantages to In house Payroll are that you must be familiar with the deductions established by law for your city and/or state. You have to have basic knowledge of labor law. Most important you need to file your payroll taxes every quarter on time. This could be a challenge if you are running your company on your own and there is the possibility you may forget your deadline. In that case you will be charged a handsome penalty form Uncle Sam.

Direct Deposit

Both in house and outsourced payroll systems have the capability of Direct Deposit. This is more popular each day. Back to when my Mom was a bookkeeper, they used to pay employees cash and put their money on little yellow envelopes. These days even paychecks are becoming extinct for the benefit of both, employer and employee. If you are doing your payroll in house, you need to set up your direct deposit with the company that your software is affiliated with. You need to collect employees information as far as account numbers (most of the service will give you the option of splitting a paycheck into different accounts), routing number and any other information on how they want their check to be deposited.

You will have to meet the deadline set by your provider in order to have the money transfer to their accounts on time for payday.

Payroll Taxes

There are different payroll taxes forms that you need to submit quarterly. In the State of Florida you report Forms 940, 941 and UCT-6. The quarters close on March 31^st, June 30, September 30, and December 31^st. You have a month to report your taxes, that will be; for the First quarter until April 30, for the Second until July 31^st, for the Third until October 31^st and for the Fourth until January 31^st of the following year.

When you are doing it in house your software usually calculates the liability for you and it is just a matter of printing a form. For other tax forms that are not set on your software you still can print a reports that will give you the information you need in order to file this particular tax form.

Outsourcing Payroll

I have done payroll both ways. Payroll is my favorite task of all my duties as a bookkeeper. When my employer announced that he wanted me to outsource payroll I thought I've lost the thing I liked the most of my job, but I was proven wrong. You still have to do some in house work even if you are outsourcing your payroll. Payroll companies will give you a lot of options, that way you still have near to total control of making changes at short notice (I personally like that). The best part is that you don't have to worry about payroll taxes. They will do it for you and better still you are no longer liable, they will take that responsibility too, so you know they will do things right. Another advantage of outsourcing your payroll if that you can enroll your company on other services that will cost you more if you were on your own. Services like Cafeteria Plan and 401k.

To determine which way is better for you, do your home work and determine the needs of your company as well as how much money you spend doing it in house and how much you will have to pay a payroll company. Make sure you tabulate the time you spend doing payroll, remember time is money. With little research I am sure you will be able to make an informed decision.