If a business is going to get into trouble, this is a big one. Big Lesson #1: Once you run payroll, fiat taxes (withholding, FICA, and Medicare) no longer belong to the business. If you don’t file the proper returns on time, there are penalties. If you don’t turn in the trustee’s taxes on time, there is interest and penalties involved and the IRS will put a lien on your assets and threaten to garnish everything. The Boston Business Journal regularly publishes all the violators and how much they owe. Some of the amounts posted are unbelievable.

There are many ways to run payroll:

Least wanted: Excel spreadsheets – come on people, this is no good!

Unless you’re going to be hiring/training payroll staff, this is second least desired: your software calculates it for you, but you do the rest. For example, you can buy a yearly subscription to QuickBooks or Peachtree (I’m sure there are many others). What is provided are up-to-date tax tables as well as federal and state payroll reports. You enter hours, print checks, file reports, make tax deposits, file and pay your state unemployment obligations, etc. All of this has to be set up by you or someone you hire. You can also configure for e-file.

So what is the problem? Not understanding payroll setup is one, not understanding how the software works is another (I’ve seen plenty of double payroll records), and here’s the big one: cash flow! If you have a quarterly schedule, the bill when it’s due can be quite large, and the company has used the money for something else it can’t legally do. And don’t forget about confidentiality.

The most desired: external payroll service; Yes, this costs money! Decide what you need and compare prices. It usually depends on the number of employees and the frequency of payroll. For example, 3 employees paid biweekly is much cheaper than someone with 100 employees who pays weekly. I have heard quotes as low as $35 per month to $200 all else being equal.

I can talk about QuickBooks because that’s where I have the most experience. They will help you every step of the way through setup. The hardest part is the setup because Intuit needs to be fully compliant. Everything must be in order, ie TIN, payments and updated reports if it is not a new payroll, state information, etc. Once set up, just enter the times and send to Intuit over the Internet and they do the rest! You just have to provide the cash! Doing it this way accomplishes accounting too!