franklin

Payroll: A DIY Project?

For many years my company worked strictly with licensed subcontractors and carpenters who would receive a 1099 at year’s end. Then at some point I decided it was time to start a payroll and hire employees. I won’t say it was a mistake, but this added a substantial layer of paperwork and expense. Unless you have lots of time or a smart, reliable admin, think twice about doing payroll in-house.

First you have to apply for an Employer ID Number (EIN) from the Feds and a separate one from the State. Once you’ve set that in motion, hold onto your seat because you’ll receive an avalanche of mail from various interested agencies. You’ll submit monthly or quarterly tax filings, New Employee reports, monthly workers’ compensation insurance reports, etc. Of course there are also OSHA safety regulations, unemployment insurance, and the list goes on. Keep in mind, too, that if an employee is in arrears with, say, child support payments, a court can require you to withhold money from that person’s paycheck and send it elsewhere. Homeland Security requires that you verify a prospect’s identity and social security number. Time-consuming business. And, God forbid, should you make a mistake on or be late with one of the tax filings, you’ll pay substantial fines, fees, and interest charges. Even with accounting software that handles payroll (we use Acclivity), there still remains plenty to monitor, update, and verify.

The alternative is to give the payroll processing task to a vendor such as ADP, Paychex, and others. For a relatively small monthly fee, they will process all this paperwork, and prepare all forms to be filed. Most set you up with an online account, so all you do is enter the weekly hours for each employee, and they’ll do the rest. They will even issue 1099’s to your subcontractors at the end of the year. Keep in mind, however, that in the eyes of the IRS or State Tax Board, no matter who prepares and maintains payroll records, the employer carries the ultimate responsibility should something go south. But you already knew that!

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