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All small business owners have to face the issue of the IRS payroll tax at some point or another. Some small business owners choose to file and pay IRS payroll taxes themselves, and others choose to use an outside accounting or payroll tax service to do it for them. Many small business owners are certainly able to calculate, file and pay IRS payroll taxes themselves; however, not everyone should do so.
Advantages of Filing IRS Payroll Taxes Yourself
If you are computer savvy, and proficient at using accounting software, you may very well be able to save yourself a lot of money and prepare and file IRS payroll taxes yourself. Many of the better financial accounting software applications do provide payroll taxes modules as well. Some applications even print out the required W-2, W-4 and IRS 941 reporting forms for you. If you're comfortable using these types of applications, you can certainly use the money that would be paid to an accountant or payroll tax service for other business purposes.
Doing IRS payroll taxes yourself can be very beneficial if your small business owners only has one or two employees. With a limited number of employees, you can generally prepare the forms, calculate the tax rates and fill out the reports needed for payroll taxes in only a couple of hours or so. Most small businesses of this size are looking for every way possible to save money on business expenses, and preparing your own payroll taxes is almost like paying yourself - in that you don't have to pay someone else to do it.
Disadvantages of Filing IRS Payroll Taxes Yourself
As your small business starts to grow, you'll probably hire more employees. If your small business reaches the point that you have five or more employees, then filing IRS payroll taxes can become burdensome, time-consuming and more difficult. When you more employees, the amount of your payroll taxes liability goes up as well. As the amounts of your tax liability goes up, reporting frequencies and amounts increases well. Unless you are always aware of the latest tax rates, reporting requirements and rules and regulations regarding payroll taxes, you may make mistakes that can cost you in fines and penalties.
Another potential drawback for filing IRS payroll taxes yourself is the fact that you may become busy with other tasks and simply overlook making timely payroll tax deposits or filing timely reports. If you fail to file tax payroll taxes reports and make deposits on time, the IRS will assess penalties and fines. So, using an outside accountant or payroll tax service could help you avoid costly fines and penalties. Most outside services do a good job of notifying you when taxes reports and payments are due, and often send reminders to make sure that they are sent in on time.
In short, if you only have one or two employees, and you have the time to do so, filing IRS payroll taxes yourself can be a valuable learning experience and save you a lot of money for your small business. However, if you're too busy, have too many employees or simply want to avoid costly calculation errors and mistakes, you may want to consider other options.
