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As a Wisconsin small business owner, you might be wondering if handling payroll yourself is a smart way to cut costs. While the direct answer is yes, you can do your own payroll, we strongly advise against it. The potential for costly mistakes, fines and wasted time far outweighs any perceived savings.

The Hidden Costs of DIY Payroll

Many entrepreneurs underestimate the complexities of payroll. It involves navigating a long list of federal, state and local regulations. A single misstep can lead to significant penalties that dwarf the cost of professional payroll services.

Consider these critical areas where mistakes can occur and the entities ready to impose fines:

Tax Compliance

• IRS (Federal and State): Incorrect withholding of federal and Wisconsin income taxes, Social Security and Medicare taxes can result in steep penalties. Tax deadlines are rigid, and missed payments or inaccurate filings draw immediate attention.
• Municipalities: Don't forget local and school taxes that may apply in your specific Wisconsin locality.

Wage and Hour Laws

• Department of Labor (DOL) Wage and Hour Division & FLSA (Fair Labor Standards Act): These govern minimum wage, overtime calculations, record-keeping provisions and even guidelines for remote workers. Misclassifying an employee as an independent contractor, for example, is a major red flag for the IRS and DOL, leading to back taxes, penalties and even legal action.
• Wisconsin Department of Workforce Development (DWD): Wisconsin has its own specific wage and hour laws, including rules for tipped employees, minor employment and "one day of rest in seven." Staying current with these state-specific nuances is a full-time job in itself.

Employee-Related Compliance

• Office of Child Support Enforcement (OCSE): Handling child support garnishments requires strict adherence to legal orders, including timely withholding and remittance.
• Worker Classification (Employee vs. 1099 Independent Contractor): The IRS rigorously scrutinizes businesses that use independent contractors to ensure they're not misclassified employees. Factors like behavioral control, financial control and the type of relationship are key determinants. Getting this wrong means you're liable for unpaid employment taxes and penalties.
• Tipped Employees & Minors: Specific regulations apply to these employee types, demanding careful attention to minimum wage, overtime and work hour restrictions.

 

Real-World Consequences of DIY Payroll

We've seen countless examples of small businesses attempting to manage payroll in-house, only to face devastating financial setbacks:

• Lost Billable Hours: A law firm partner, attempting to save on payroll processing, lost an entire quarter's worth of billable legal revenue due to a software glitch, forcing him to recreate data. Imagine the cost of an attorney's time spent on administrative fixes instead of client work!
• Unexpected Penalties: Another law firm, confident in their "100% accurate" QuickBooks payroll, was hit with a $1,000 IRS penalty notice. The error was discovered only during their conversion to our service.
• Multi-State Headaches: A non-profit startup with employees in three different states and a 1099 contractor in Japan narrowly avoided significant multi-state compliance issues by deciding to outsource payroll from the start.

Outsourcing your payroll to professionals at a payroll service like Connect & Simplify makes sure you don’t lose time (or money!) having to correct mistakes and deal with the IRS.

Don't attempt to become a payroll expert. Your expertise lies in your business. Let the professionals handle the intricacies of payroll, so you can focus on running and growing your successful small business.

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