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Using a Payroll Service

Advantages of Using a Payroll Service

Preparing a payroll is an important function. It's not a function that should be taken lightly. Employees must be paid on time, their paychecks must be accurate, employment tax deposits must be made timely, and employment tax returns must be filed timely as well.

Save time and increase profits:

For a relatively modest monthly fee, you should consider using a payroll service.

Your time would be better spent focusing on income producing activities, ways to operate your business more efficiently, reducing the cost of operations, and customer service.

Avoid costly penalties!

If you have employees, you may be interested in: Self-employed payroll made easy with Paychex.

Paychex is a payroll preparation service. They've been around many years. Letting them handle your payroll makes a great deal of sense. Not only will you free up precious time that you can devote to managing your business, you'll also be assured of complying with the complex rules governing payroll taxes. The IRS takes a very aggressive approach to payroll tax compliance. Penalties can be as high as 100% of the tax due plus interest.

Are You An Employee of Your Business?

If your business is organized as a C or S corporation and you work for your business, you are an owner/employee of your business. You are subject to tax withholdings and get a W-2 form at year end.

On the other hand, if you're a sole proprietor, general partner in a partnership, or LLC member, where no election has been made to treat the LLC as a C or S corporation for tax purposes, then you are classified as self-employed and not as an employee of the business.

As a self-employed person, you are not subject to tax withholdings and you don't get a W-2 form at year end. Self-employed persons must make estimated tax payments quarterly to cover estimated federal income taxes and self-employment tax liabilities.

If you're a partner in a partnership or LLC member where the LLC has not elected to be treated as a C or S corporation for tax purposes, then you and all other partners get Schedule K-1 at year end which reports income, deductions, credits, gains, and losses for each partner.

A sole proprietor files Schedule C annually to report income and expenses and Schedule SE annually to report self-employment taxes.

Using a Payroll Service: Your Role When Using a Payroll Service

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