Thursday, August 4, 2011

Pro Se Payroll

At the beginning of the year we opted to hire a payroll company to handle our domestic employee (i.e. our nanny) as well as the office assistant for my legal practice. January was a crazy time, and unlike our normal selves, we opted to pay for service because we just didn't have the time or energy to figure out payroll. So we signed up, and then the headaches began.

At the end of the first quarter we received a bill from the IRS requesting $700 in payroll taxes we owed for our household account. Apparently the "payroll specialist" we hired hadn't set things up quite right. They overlooked that little detail! Annoyed, but still convinced they were doing us a favor we paid the bill, had a "chat" with the company, and continued paying them for the service. Life was still crazy on our end.

Then life calmed down a bit, and my husband ran the numbers. After adding up all the fees here and there we discovered we were paying these specialists $2800 a year to handle payroll for a nanny who works 20-25 hours a week and an office assistant who averages 10 hours a week. That was way too much, we vowed to make a change.

At the end of the second quarter I received notice from Wisconsin's DWD, unemployment tax issues were not correct, compliments of the so-called specialist. That was the last straw. We knew we could do a better job, they'd set the bar so low.

After a review of on-line options we opted to use a free month trial of a payroll software. Then we paid $75 for a bookkeeper who is knowledgeable about payroll taxes and withholdings to review our system. She had some feedback, and we learned that payroll wasn't that difficult, especially for two type A personalities.

We paid a bit for this lesson, but it is one worth repeating. When you outsource monetary tasks beware -- if you don't know what the company should be doing, you can't adequately monitor performance or judge compensation. The lesson made me remember a quote from Oprah "I always sign the checks, I know where my money is going."

So, if you have a household employee or a setting up a business, steer clear of the payroll companies. I recommend a simple software package, learn the mechanics, and go from there.

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