Payroll is a vital operation. Most business payrolls account for 30-50% of operating expenses. While there are many options when it comes to business payroll, there are three major categories to choose from: Payroll Providers, Accountants, and Certified Public Accountants (CPA). Each option comes with its own pros and cons.
A payroll provider is a person or company that provides a software for you to run your own payroll in-house. Usually these companies will have lots of handy automatic tax submissions and calculations as well as bookkeeping features.
Pros: This software is usually great for automating your payroll tasks, tracking your annual payroll, and simplifying the process. It is also extremely cost-effective. Prices range anywhere from $20-$150 a month for a business of 10 employees or less.
Cons: These softwares are not infallible. Even with this software, someone must run the payroll, check for mistakes, and submit taxes properly. If you’re ignorant when it comes to employment and tax law, then you should hire a trained individual to manage your payroll. Tax mistakes can cost you thousands later on.
Accountants and Bookkeeping Services
Accountants and bookkeepers are experienced tax professionals. If you know you’re lost when running payroll, one option is to hire a bookkeeper or accountant to run your payroll for you.
Pros: These firms have a reputation to uphold and a trained staff. They’re going to catch many mistakes that you will make. Additionally, accountants will be able to do other tax and accounting tasks. This can save you hours of time. Good accountants save you money because they prevent costly fines for tax mistakes.
Cons: Accountants and bookkeepers are more expensive than a payroll software. Also, if accountants make a mistake, the liability still falls on you (per the IRS and most state rules). If you get a bad accountant and they intentionally commit fraud, the tax liability still falls on you to correct the mistake and pay any fines. (Do rest assured though, in cases of fraud, accountants who intentionally made these errors will usually go to jail.)
CPA (Certified Public Accountants)
Pros: A CPA has more education than an accountant or a bookkeeper. They can run your payroll and do all of your taxes. Also, there’s a hidden bonus: liability for tax mistakes fall on the CPA. Because of their additional qualifications, if a mistake is made, then the liability falls on the CPA and not on your business. Additionally, a CPA is more knowledgeable of tax law and can help you save a lot of money with tax breaks. Also, if you are in trouble with the IRS or another tax organization, a CPA can go to court for you and talk to the IRS on your behalf.
Cons: These are usually the most expensive options. A CPA has to charge higher prices because of the extra service they provide. You pay for the experience as well as the security of knowing that the liability is off of your business.
Be careful to check all CPA licenses. Someone could falsely claim to be a CPA or lose their CPA license. It is illegal for anyone to claim falsely to be a CPA, but can still happen. Do your homework before hiring anyone!
Resources to help you make a final decision
To learn more about Payroll Providers, check out our reviews of some of the top 2018 Payroll Providers. Be aware that not all payroll providers are equal. If you go this route, do your research and choose the best for your business.
If you’re interested in an accountant, you can help mitigate the risk of getting a bad accountant by searching for one that is registered as an e-file provider with the IRS. The registration processes is highly stringent. This stringent screening process lowers the risk of getting a bad accountant who will mess up your payroll or taxes. Check out the free IRS e-file provider search.
Finally, if you’re interested in checking out a CPA and making sure that they are verifiable, use this free CPA verification website. You can look up CPAs by state and verify they are in good standing and have active licences.