Did Your Payroll Service File Your Taxes? | Factors to Look at

Did Your Payroll Service File Your Taxes?

payroll servicesA recent story in The Wall Street Journal tells the startling story of payroll tax services that have failed to properly handle their clients’ tax deposits and filings. Not only did the small business clients lose their tax money, but the payroll tax service packed up and left, leaving the small business owners to deal with tax bills and fines on their own.

“We want small business owners to know what to look for when selecting payroll software or services, including our own software,” stated Mike Kappel, President of Patriot Software Company

Patriot Software, LLC, provides simple software for the smallest of small businesses and understands the importance of trust between a business owner and a vendor. On Patriot’s website, their Declaration of Trust lists the extensive measures they have taken to protect customer data and funds.

Kappel adds, “We suggest four measures a small business owner could question when assessing the security of a payroll service provider.”

1. Audits and Surprise Tests

You want your payroll service to undergo annual audits and surprise tests from an independent CPA firm who examines the payroll process.

For example, Patriot undergoes an annual audit of its finances from an outside CPA firm. Todd Schmitt, Treasurer, states, “The CPA firm just completed our audit last month. We also have surprise tests each year conducted by the independent CPA firm, at their convenience. They examine our payroll process to verify that the payroll tax money we collected from customers was properly handled and delivered to the correct taxing agency.”

2. Full Disclosure

Wendy Smith, Patriot’s Customer Service Manager, suggests, “Ask the payroll service company if account information is available to customers. Is there full disclosure of when the payroll taxes are due, the amount, and when the taxes are actually paid?” For example, Patriot’s online full service payroll (formerly called TaxBeGone), allows customers to clearly view the status of their tax payments.

“And customers are always welcome to call, chat, or email to communicate with a “real person” if they have questions about tax deposits or filings,” adds Smith. “Find out if the payroll service you select also offers free routine customer support.”

3. Checks and Balances

A payroll service needs to have checks and balances in place to ensure that the tax funds received match the tax funds paid out. “Does your payroll service offer built-in checks and balances, constantly reconciling the records of deposits and filings?,” asks Doug Simmons, Payroll Tax Specialist at Patriot Software, LLC

Patriot’s Full Service Payroll checks for tax funds received and paid out, constantly reconciling the records of deposits and filings. Internal checks and balances may not be visible to a payroll service’s customers, so you would have to trust the payroll service provider’s claim.

Ultimately, payroll tax payment confirmation from the state will be the definitive reassurance for a business owner.

4. Payment Confirmation

“Your payroll service should be able to help you get payment confirmation from your state,” Simmons explains. “Some states require electronic filing, and in that case, business owners have an online account where they can instantly monitor the status of their payments easily.”

Although most states are moving in that direction, not every state currently requires electronic filing. “In that case, we can give our customers the correct phone number to call for their state to get payment confirmation,” Simmons adds.


Forty percent of small businesses entrust their payroll and payroll tax service to a third party because the laws surrounding employment and taxes are complex and change so often. Yet the reports about questionable tax practices by some payroll services raise concern among small business owners. Patriot Software, LLC, advises small business owners to be vigilant and make sure their payroll service is doing its job.

See Patriot Software’s Declaration of Trust for an itemized list of the protections in place for Patriot’s customers.

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