Should a solo or small medical practice use a payroll service?

One debate we frequently have in our google group is whether to do payroll yourself or outsource it to a company. Here’s Ho Sun’s take, originally published March 14, 2011:

I paid my front desk person her first salary on Friday using Quickbooks Payroll.  Overall, it went pretty smoothly, and was self-explanatory. All the payroll figures were calculated correctly.  I went the direct deposit route for wages and e-pay for paying payroll taxes.  I was able to pay both my portion and my employee’s portion through this method.

Before you can pay state payroll taxes, you’ll need to first obtain your state’s employment development department (EDD) number.  For California, you can register at:

http://www.edd.ca.gov/Payroll_Taxes/Am_I_Required_to_Register_as_an_Employer.htm#registration

You can only register after the first day you pay your employee.  The number gets generated immediately, so it shouldn’t be a problem.

Also, if you want to pay federal payroll taxes electronically, you’ll need to register with EFTPS at:

https://www.eftps.gov/eftps/direct/EftpsHome.page

This one takes a bit longer.  First, you’ll need a business checking account tied to your TIN before you can enroll.  After you submit an initial application online, EFTPS will mail you a PIN number within a week or so.  Afterwards, you will be able to complete your registration online.  Don’t lose this PIN number!  You’ll have to use the bank account registered with EFTPS to pay for your payroll taxes.  You can change bank accounts whenever you want.  Just don’t forget to update your banking information on EFTPS first before you use it.

Once your EFTPS and EDD is squared away, you just have to follow the instructions on Quickbooks and then bid farewell to your money.

Howie’s note: doing payroll is something that sounds scary, but the company you send it to will get a $12/ hour employee to do it. It’s not rocket science and doesn’t take much time. You can tabulate the hours from your employees’ timecards or a time tracking app. Regardless of not whether you outsource payroll, you will want to check and verify this.

Off note but for non exempt employees if they work overtime you need to pay them 1.5 base. We recently had someone whose employee abused overtime. You can stipulate in your employee handbook that employees aren’t allowed to work overtime without your prior permission, and discipline them up to termination for violating your rules, but even if they break the rule you still need to pay the, overtime.

Back to payroll. Some of the companies you can use are to DIY are Quickbooks or Gusto. Quickbooks even has a iPhone app you can do your payroll on for $35 a month.. I’m old fashioned so use the desktop version which was $516 last year for subscription plus the software was about $400, last updated in 2016.

If you do it yourself, Quickbooks or these other companies make it easy to file your federal and state quarterly and yearly tax forms. You will need to reconcile withholdings with payroll taxes as well as pay unemployment taxes. It sounds complicated but is not rocket science. I believe the $80/ month online version for QB takes care of automatically filing the forms. Occasionally some state (Pennsylvania) or your county will have some form that isn’t supported by Quickbooks and you’ll have to figure it out. But it’s the same form year after year so not worth paying an accountant a arm and leg.

You could choose to pay a little extra and have quickbooks “take care” of your payroll rather than DIY through their software, but most of us elect not to. Some other companies used by colleagues are Suntrust, SurePayroll, or Heartland. They cost about $500-600 per year including tax filing. So if your accountant is charging you $10,000 a year to take care of payroll find a different accountant. Unfortunately some colleagues have been taken advantage of!

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