Questions re: DD for a Payroll Service
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I am considering starting a payroll service. I already do payroll for some clients but it's usually after-the-fact payroll. I have an enhanced payroll for accountants subscription.What I want to do is this: Open a new company in QB for each of my clients (I do this now) but I want to use my "holding" bank account (which I will open if this will work) to do the direct deposit and pay the taxes. Is there anything legally/ethically stopping me from having all of their information in the company file but my routing and account number for the bank account?If this will work, I will have the clients' net payroll and taxes deposited into the "holding account" prior to doing the direct deposit to the employees and paying the taxes. I'm thinking of using ACH for this through my bank.Can anyone think of any pitfalls in this idea? Any other suggestions for opening a successful payroll service?Thanks!
Answer
I think an easier way to do this would be to sign up as an EFTPS batch provider (free, at irs.gov). Then you can use a trust account from which all taxes are paid and you aren't the one writing the Fed Deposit Coupons out.
What I do is have the clients FAX me the employee hours, and I DD the checks, and then pay federal tax via the EFTPS out of the client bank account. The state has its own EFTPS system that we use for electronic debit of payroll and unemployment tax.
I would be leery of you holding all the money in a "trust" account, paying payroll out of it, and also taxes. What about the inevitable error? How would you track it? You could be on the hook for some serious dinero... with our system the only thing we do is calculate payroll and authorize direct debit of the customers' accounts for federal and state tax, fill out forms, and DD the employee checks via the client's bank.
Answer
What you are saying makes alot of sense. I never knew about the batch processing and I will definitely look into that.
What are you using for the DD? QuickBooks? I love the idea of using QuickBooks for that since it's so easy but I was thinking it would be easier to build the direct deposit fees into my fees. If I DD out of their account, they are paying the fees.
Thanks for the help so far!!
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Yes, use QB and just jack up your fees a bit. You will be DD out of their bank account, so there could be a bank charge on their end anyway. No money that isn't yours should touch your palm! Cardinal rule: CYA
