Selecting A Payroll Provider
Due Diligence Needed
by Mary Krantz, CPA & Cindy Blaum, CPA
Dennis, Gartland & Niergarth
A professional payroll service can save your business time and money. Preparation of payroll, the associated tax returns and remittance of the related taxes can be stressful for your staff and uses up their available time needed to perform other important tasks. The payroll tax rules can be complicated and there are numerous due dates for the different type of payroll taxes. Staying current on all of the federal and state payroll and payroll tax regulations can be a real challenge for your payroll clerk, which is often times the business owner.
Most outside payroll services are ethical and operate in a professional manner. Occasionally, you hear of a payroll company that has absconded with payroll taxes underpaid or unpaid. Unfortunately, the US District Court and the Court of Appeals have ruled that using an agent to handle tax obligations does not relieve the employer of responsibility for those obligations.
When a business contracts for payroll services, typically the payroll service will debit the bank accounts of the business when payroll is prepared for the gross amount of the payroll and the related employer taxes. The payroll service then pays the liabilities to the appropriate agencies. This procedure, however, does not relieve the employer’s responsibility to assure the payroll taxes are paid in full and paid timely. There have been many cases where employers have been required to pay the payroll taxes a second time when their payroll service has failed to properly pay the tax. This could also include interest.
A business that is looking to turn over such a vital portion of their financial responsibilities to an outsider must perform due diligence before engaging the payroll service provider. Some steps to take prior to selecting a payroll service are:
- Ask for referrals from other area business owners or your professional consultants
- Verify the credentials of the service provider
- Check to see that provider is insured (bonded)
- Ask for references and speak to other satisfied users of the service
Once the payroll service provider has been engaged, if any payroll tax notices are received by the employer, do not rely on the payroll service provide alone to respond to those notices. There is a phone number to call on most notices and the employer should confirm with the IRS or the State Agency that the issue has been properly settled and there are no further taxes due.
Remember, the business owner/employer has the ultimate responsibility for seeing that all employment taxes are paid timely and in full. This is true for all payroll liability accounts including deferred compensation, Friend of the Court and any other withholdings from the employees’ paychecks.
As with any services you contract for, it is essential to do your due diligence before turning over your money and reputation to an outside service.
Mary F. Krantz, CPA, CHBC has been a partner at Dennis, Gartland & Niergarth since 1998, after joining the firm in 1986. Mary oversees the firms BizTek department and Professional Offices niche team. She provides audit, tax and operational solutions for professional offices, manufacturing, construction, agriculture, hospitality, government and nonprofit organizations, with additional expertise working with villages and townships. Mary is a member of the American Institute of CPAs, Michigan Association of CPAs, National Society of Certified Healthcare Business Consultants and Michigan Government Finance Officers Association.
Cindy Blaum, CPA joined Dennis, Gartland & Niergarth in 1996 and has worked in the accounting field for more than 20 years. She manages DGN’s BizTek department and Professional Offices Niche team. A Certified QuickBooks ProAdvisor since 2000, Blaum has achieved ProAdvisor-Advanced status and leads DGN’s QuickBooks consulting. She is a member of the American Institute for CPAs and Michigan Association of CPAs.