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This is why you use a payroll company that takes all the money for you for each paycheck and handles the quarterly filing for you -- no "extra cash" hanging aro

This is why you use a payroll company that takes all the money for you for each paycheck and handles the quarterly filing for you -- no "extra cash" hanging around. I think this is called "Full Service Payroll" and can even include insurance against tax liability. I assume they make money on the float, but I'm not sure.

mechanical_fish 12y ago
Yes, my company has used SurePayroll and it works exactly like this. They charge fees, as well as presumably making some money on the float. The fee is around $40 per month (per employee, I suspect) and it is money well spent. There are pains associated with the service - the reporting is not entirely transparent, and when things go wrong with the automated systems I have gotten odd letters from my tax authorities which needed to be turned into support tickets (which were then handled promptly). But I would never use anything less than a payroll service. If my payroll gets more complex I might upgrade to a bookkeeper with well-documented payroll experience (at a cost which would, I suspect, be considerably higher than $40 a month), but I'd never try to do payroll myself, for reasons which are amply attested in this thread. Also, accountants. +1 for accountants.
jacquesm 12y ago
That's very dangerous, no matter what the reputation of the firm. The thing to do is to use separate accounts for reserves like these and to pay directly into the coffers of the tax man, lest the party that you do business with unexpectedly goes bust (they do) and you end up being liable again for the same amount of tax that you already paid to the payroll company. Don't for one second think that you're off the hook because you paid the payroll taxes to some other company. The best arrangement is where they tell you exactly what is to be reserved and when it is due and you do the payments. That's how I've been doing it and it works flawless, never a problem (so far!). As an extra bonus, you get to check the amount against the last couple of payments you made and you'll spot any big fluctuations before things get out of hand.
- tptacek 12y ago
  This may be good advice in NL, but it's sort of diametrically the opposite of best common practice in the US. Payroll being handled by payroll firms is the norm in the US, and the stories about terrible payroll withholding screwups hurting companies are, as far as I can tell, invariably the result of people trying to handle this themselves, paying "directly into the coffers of the tax man".
  - raverbashing 12y ago
    Regardless of the company always keep the payment certificates/receipts Yes, dealing with the tax authorities directly is usually more complicated (might be simpler for a sole proprietor/small number of employees)
  - jacquesm 12y ago
    Does the American system have any provision for payroll companies that fail to fulfill their obligations? (segregated accounts per client, accounts only usable for remittance of the salaries or taxes with the payroll company then taking out its slice when everything else has been done?) I remember the Accupay affair and that took a lot of employers by surprise, and even though 'best common practice in the US' may be that payroll firms are the norm, at least in that particular case the culprit was definitely the payroll company and not any one of their multitude of clients. And there were strong indications that Accupay was not the only company that pulled that particular stunt. All of the companies affected were held liable and had to pay (again).
    - tptacek 12y ago
      You remember the affair of a tiny payroll processing company in Baltimore? Is there some news source about them that isn't in the local Baltimore media that I missed? I had to give Google News a custom search range just to find those local hits. If that's the kind of firm you're talking about, I agree. Don't use tiny fly-by-night payroll firms. Just use SurePayroll or someone like them. I'm serious: that's a good point you have. When I said "the norm is to use a payroll firm", I should have said "big payroll firm". There are a lot of little firms out there, and I wouldn't feel safe using them either.

mechanical_fish 12y ago

Yes, my company has used SurePayroll and it works exactly like this. They charge fees, as well as presumably making some money on the float. The fee is around $40 per month (per employee, I suspect) and it is money well spent. There are pains associated with the service - the reporting is not entirely transparent, and when things go wrong with the automated systems I have gotten odd letters from my tax authorities which needed to be turned into support tickets (which were then handled promptly). But I would never use anything less than a payroll service. If my payroll gets more complex I might upgrade to a bookkeeper with well-documented payroll experience (at a cost which would, I suspect, be considerably higher than $40 a month), but I'd never try to do payroll myself, for reasons which are amply attested in this thread. Also, accountants. +1 for accountants.

jacquesm 12y ago

That's very dangerous, no matter what the reputation of the firm. The thing to do is to use separate accounts for reserves like these and to pay directly into the coffers of the tax man, lest the party that you do business with unexpectedly goes bust (they do) and you end up being liable again for the same amount of tax that you already paid to the payroll company. Don't for one second think that you're off the hook because you paid the payroll taxes to some other company. The best arrangement is where they tell you exactly what is to be reserved and when it is due and you do the payments. That's how I've been doing it and it works flawless, never a problem (so far!). As an extra bonus, you get to check the amount against the last couple of payments you made and you'll spot any big fluctuations before things get out of hand.

tptacek 12y ago
This may be good advice in NL, but it's sort of diametrically the opposite of best common practice in the US. Payroll being handled by payroll firms is the norm in the US, and the stories about terrible payroll withholding screwups hurting companies are, as far as I can tell, invariably the result of people trying to handle this themselves, paying "directly into the coffers of the tax man".
- raverbashing 12y ago
  Regardless of the company always keep the payment certificates/receipts Yes, dealing with the tax authorities directly is usually more complicated (might be simpler for a sole proprietor/small number of employees)
- jacquesm 12y ago
  Does the American system have any provision for payroll companies that fail to fulfill their obligations? (segregated accounts per client, accounts only usable for remittance of the salaries or taxes with the payroll company then taking out its slice when everything else has been done?) I remember the Accupay affair and that took a lot of employers by surprise, and even though 'best common practice in the US' may be that payroll firms are the norm, at least in that particular case the culprit was definitely the payroll company and not any one of their multitude of clients. And there were strong indications that Accupay was not the only company that pulled that particular stunt. All of the companies affected were held liable and had to pay (again).
  - tptacek 12y ago
    You remember the affair of a tiny payroll processing company in Baltimore? Is there some news source about them that isn't in the local Baltimore media that I missed? I had to give Google News a custom search range just to find those local hits. If that's the kind of firm you're talking about, I agree. Don't use tiny fly-by-night payroll firms. Just use SurePayroll or someone like them. I'm serious: that's a good point you have. When I said "the norm is to use a payroll firm", I should have said "big payroll firm". There are a lot of little firms out there, and I wouldn't feel safe using them either.