There’s one task that I insist that my business clients do not perform themselves: payroll processing. Given the penalties and legal liability issues, I urge them to go with an extremely reputable company. There are several that do an excellent job; this post is not about which one is my favorite.
Rather, I was reminded by Joe Kristan’s post yesterday in Roth Tax Updates about the dangers of using certain companies. If an employee of a payroll company steals your tax deposits, what would happen? If you’re with a large, reputable firm, the deposit will be made, and the payroll company will go after the employees involved. If you’re with Fly-By-Night Payroll, expect the IRS and the FTB to knock on your door.
Here are three questions you should always ask of your payroll service company:
– Will they make all appropriate/required tax deposits in all the jurisdictions in which we operate? Will they be done on a timely basis?
– Assume that the deposit is not timely made. Who will be liable for the interest and/or penalties?
– Will you put this guarantee in writing?
Of course, you should get references, especially for small companies. Yes, cost is a factor you need to consider when choosing a payroll company. But so is the ability to handle the inevitable errors that will occur.