Full-Service Payroll: What Is a Payroll Service Provider?

 The IRS defines a Payroll Service Provider (PSP) as “a third party that can help an employer administer payroll and employment tax obligations.”

A full-service PSP performs many different tasks for its clients. Each of these tasks allows business owners and managers to focus on the important work of running and growing their business instead of getting bogged down by payroll and tax preparation.

RESPONSIBILITIES OF A PAYROLL SERVICE PROVIDER

When an employer contracts with a PSP, they can choose to have the PSP administer payroll, handle tax obligations, or both. 

According to the IRS, the PSP may perform the following tasks, dependent upon their contract with the employer:

• Prepare the paychecks for the employees of the employer.
• Prepare Forms 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, and 941, Employer's QUARTERLY Federal Tax Return using the employer's EIN for signature by the employer.
• File Forms 940 and 941 using the employer's EIN.
• Make federal tax deposits and federal tax payments for the taxes reported on the Forms 940 and 941 using the employer's EIN.
• Prepare Form W-3, Transmittal of Wage and Tax Statements, and file and furnish Forms W-2, Wage and Tax Statement, for the employees of the employer using the employer's EIN.
• An employer's use of a PSP does not relieve the employer of its employment tax obligations or liability for employment taxes. This type of third-party does not assume any of the employer's employment tax liability.

What does all of this look like on a day-to-day basis? Well, it looks like small business owners can shed the burden of paperwork, payroll tasks, and tax preparation!

There are several benefits to working with a PSP. Let’s take a look at how it all works.  

Related: The Best Payroll Practices For Your Small Business

PAYROLL PROCESSING & REPORTING

Your PSP can manage all of your payroll processing, which reduces the amount of time you spend calculating wages and processing payments. Whether you issue paper paychecks, use direct deposit, or pay via pay card, your PSP can automate and run this process for you. 

A full-service payroll professional can also run detailed reports about your payroll operations. That includes everything from how many hours your employees have worked, how much taxes have been withheld from their paychecks, and how much you have spent in wages over any defined period. 

TAX WITHHOLDING & GARNISHING WAGES

It is imperative that tax withholding from your employee’s paychecks is done accurately. Any employees affected by wage garnishment must also have their wages adjusted accordingly. Your PSP will know exactly how to manage these expectations and keep everything in line. 

Related: How Are Employee Bonuses Taxed?

TAX FILING

A payroll service provider manages all of your federal, state, and local taxes. That includes maintaining tax records, preparing all of the required forms (including your employees’ W-2s), and assisting with year-end reporting. 

MAINTAINING A KNOWLEDGE BASE

Payroll service providers maintain a wealth of knowledge regarding regulations, changes in tax law, payroll and tax management technologies, and all sorts of compliance. 

CHALIFF + ASSOCIATES OFFERS FULL-SERVICE PAYROLL MANAGEMENT

At Chaliff + Associates, we provide our clients with comprehensive payroll services. By taking care of the work associated with payroll management, payroll reporting, tax withholdings, tax filing, and more, we give you back your time! With Chaliff + Associates at your side, you can stop stressing over payroll numbers, and focus on growing your business. 

To learn more about how we can help you and your business, schedule a free consultation today.