Most s corporation owners have heard that they must run payroll. But what does this really mean and how much does it cost? It’s easy, check it out.
Disclaimer: S Corporation taxes and payroll are complicated. We strongly recommend that you seek consultation for managing your s corporation and payroll. Mistakes in with s corps and payroll can lead to multiple years of IRS disallowance and penalties. It’s really a nightmare – get help.
How to run payroll for s corporation owners and how much does it cost?
There are basically 4 levels of payroll services and you get what you pay for.
- Online “do it yourself” payroll runs about $60-$150 per month
- Mom and pop accounting firms payroll for about $140 to $240 per month
- Full service big firms from $220 to $320 per month
- HR Companies for about $250 to $350 per month
You can’t just write yourself a check!
You must run payroll as if you have employees – and you are “the employee”. This means you will be withholding taxes, depositing taxes, filing payroll tax returns, and preparing and filing W2s (and the state equivalent filings).
This is a lot of work and a huge hassle, So why do it? Because it is often worth it if your s corporation makes a decent profit because of the potential tax savings.
Some notes about running payroll costs and levels of service
When it comes to payroll services, you pretty much get what you pay for.
Most online payroll services will advertise cheaper rates, but by the time you read the fine print and pay for everything, you are looking at quite a bit more than “$29.99/month” or whatever they use to get you to click. This is true for the big firms too. “Oh, you want a W2? That’s extra”. Typical corporate bait and switch tactics. I hate that.
Running payroll yourself is a cost savings but it puts a lot of burden and time costs on the small business owner. The real problem is when things go wrong. The endless flow of IRS letters and the cost to fix them are a total nightmare.
Choosing a mom and pop firm is often a wise choice and you will see more transparent payroll costs but if you end up with an unresponsive accountant you will end up in a frustrating situation. Have you ever had an unresponsive tax preparer or one who takes months to complete your tax return? This is really bad news when it comes to payroll.
The big firms and the HR companies are notorious for making their pricing hidden and complicated and many s corporation owners complain that it ends up costing them more than they thought. There are also contracts to deal with. What if you see a drop in profit and you wan to stop running payroll for 6 months? This is a risk with the big firms.