All companies that have employees have to process payroll. You can do payroll by hand, with all the forms available from the Internal Revenue Service, but that is slow, tedious, and prone to expensive errors.
Or you can contract with a payroll processing service to do your payroll and cut your paychecks. These services will also handle all of your taxes for you, which saves time and effort and reduces or eliminates mistakes. However, payroll outsourcing services are expensive and inflexible.
Payroll software is a great solution to both of these problems, since it is fast and automated but doesn’t charge the same fees as most services. And if you do your homework, you can get very cheap or sometimes even free payroll software to handle your business needs.
Good software is regularly updated, so that it keeps up with all the latest changes in the tax code from the federal government as well as all of the individual states. It also is very reliable, and is tested thoroughly before it is released to make sure all of the calculations are done absolutely perfectly, so you don’t wind up with accidental miscalculations leading to expensive penalties from the IRS.
You can also get payroll software designed to integrate seamlessly with your accounting software, depending of course on what accounting software you use. Payroll processing software will calculate paychecks for your employees, whether you have just one employee or thousands. It will also calculate the taxes and other withholdings such as health insurance, 401(k)s, life insurance, child support, wage garnishments, or any other deduction, and can likewise handle extra payments like expense reimbursements or bonuses.
If you have employees, you should definitely shop around for good, cheap or free payroll software to handle your needs. Sometimes free trials are available, these are a great way of test-driving good software before you actually make a long term commitment to it, so you should try to find a free trial if you’re considering payroll processing software.