This has been a painful experience. We do all of our own payroll. We like to be in control and use no payroll service. My computer whiz brother made the nicest payroll program using Filemaker software. It is the only program based on an on-screen time card. With either my Macbook Air or IPad I do payroll right with my guys. We fill in the on screen time card and everything is calculated. I write out a check then email their stub to them. This method verifies real hours worked with our employees. The program also allows easy adjustment for year to year changes in the deduction levels and calculates all the various taxes automatically.
This was fine until the Payroll Tax Deduction law of 2011 went into effect. The guideline for tax levels is the Federal Circular E, which indicated that the social security rates would remain the same through 2011. For 26 years the employer contribution rate was the same as the employee rate. However, well into 2011, and without notice, the Feds changed the single social security rate into a 2 level rate; the employee contribution being less than the employer contribution. They also made the rate difference retroactive to the beginning of the year.
This caused us to have to write rebate checks to the employees, petition the IRS to refund our over payments (which they do so not at all or with much reluctance) and overhaul our computer program, along with other record keeping complications.
As with other new business regulations this was done hastily. There were no mailed notices. Since employers are now required to pay payroll taxes electronically there should have been a big notice on the EFTPS payment website. But it wasn’t there.
No warning, just a demand for instant compliance. What people don’t understand is the IRS does not collect taxes. Employers are forced to do it for free. The IRS only verifies and enforces. Your reward is to be left alone if you follow all the rules exactly. Your punishment is penalties and interest for any infraction. With the new 4,000 IRS agents they do not miss a chance to get more money out of us.
The least they could do would have been to give us a little notice, since we are doing it for them for FREE! We are debating using a Payroll Service, however, it is just more complicated Government regulations forcing businesses to hire more third party agents to keep up. In the end prices either go up, or profits go down and control of your business goes farther away. We are fortunate that we can weather these attacks. I’m afraid for some businesses, with current difficulties, it’s one step closer to giving up.