Should I run payroll myself or use a payroll service?
Running payroll yourself is possible, especially with only one or two employees on straightforward wages. But payroll involves more than printing checks. You’re responsible for calculating withholdings, making tax deposits on time, filing quarterly reports, and producing W-2s at year end. Miss a deadline or calculate something wrong and the penalties add up fast.
The IRS doesn’t care if you’re a small operation figuring things out. Late payroll tax deposits trigger penalties starting at 2% and climbing to 15% depending on how late. Incorrect withholding means you owe the difference plus interest. These aren’t theoretical risks. They happen regularly to small business owners who thought payroll was simpler than it is.
Payroll software sits between doing everything manually and handing it off completely. Services like Gusto, QuickBooks Payroll, or ADP Run calculate withholdings, generate pay stubs, and file taxes automatically. You enter hours, approve the run, and the software handles the rest. This works well if you’re comfortable managing the process and can dedicate consistent time to it each pay period. Most Tri-Cities bookkeepers recommend starting here if you want to stay hands-on but reduce the chance of errors.
Full payroll services take it further. Someone else manages the entire process. You approve hours and they handle everything including troubleshooting when something doesn’t look right. This makes sense when you have tipped employees, commission structures, multiple pay rates, or a mix of W-2 employees and 1099 contractors. It also makes sense if you simply don’t want to think about payroll and would rather spend that time running your business.
The cost comparison isn’t just the service fee versus doing it free. Your time has value. If you’re spending three hours per pay period on payroll when you could be doing billable work or serving customers, that’s a real cost. Add the stress of making sure you filed correctly and the potential penalty if you didn’t.
For most small businesses, the decision comes down to volume and complexity. A sole proprietor with one part-time helper on hourly wages can manage with payroll software. A restaurant with fifteen employees, tip reporting, and varied schedules shouldn’t try to handle that alone. The breakpoint is usually somewhere between three and five employees, or whenever you catch yourself dreading payroll day.
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More Questions
How do I know if I need to collect sales tax in other states?
You need to collect sales tax in states where you have economic nexus, which usually means exceeding $100,000 in sales or 200 transactions. The rules changed in 2018, so physical presence is no longer required.
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In-store sales collect tax at your local Virginia rate. Online sales get more complicated because you charge based on where the customer lives, and you may owe tax in other states once you hit their sales thresholds.
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Keep documentation for all income and expenses reported on your tax return. This includes bank statements, receipts, invoices, payroll records, and asset purchase documentation.
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Daily for cash and POS sales, weekly for credit card batches, monthly for full bank reconciliation. Restaurants have too many transactions and too much cash exposure to wait until month-end.
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Structure deposits to cover your initial costs, invoice the same day you hit milestones, and track billed versus received separately. A cash reserve covers the inevitable gaps between completing work and getting paid.
Read answerWhat documents do I need to provide for catch-up bookkeeping?
Bank statements are the foundation. Credit card statements come next. Receipts, invoices, and payroll records help fill in the details, but you don't need perfect documentation to get started.
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