Making a Mid-Year Switch in Payroll Services

Making a Mid-Year Switch to a Payroll Services Company isn't as challenging as it used to be and shouldn't cause you to lose any sleep.

Many years ago, a mid-year conversion would cause employees to receive two W2s at year end, and make the current quarter filings a potential mess.

Thank goodness technology has caught up.

I generally see the following scenarios when bringing on a new client for payroll and tax filing services...

Current System - Transitioning To - Payroll Services Company

1. In-house payroll (using software) - to - Payroll Services
2. Manual payroll (using spreadsheet docs or doing payroll by hand) - to - Payroll Services
3. Payroll Services (using another p.s. company) - to - Payroll Services
4. Accountant/Bookkeeper - to - Payroll Services

In any of these cases, the same approach is usually taken with the Payroll Company:

• You'll want to exchange copies of the Quarterly Filing Reports (Both Federal and State(s)) for any of the Quarters that have passed so far this year.
• You'll want to exchange payroll reports for each payroll so far in the current quarter, so that they can accurately file and deposit for the current quarter.
• You'll want to grab a Year to Date Payroll Report (Jan. 1st - Today)
• In both the per payroll reports and the year to date report it is important that those reports be broken down as follows:

Employee Name: Hours worked | Gross Pay - Taxes - Deductions = Net Pay

This is done to make sure the Payroll Company knows who's been paid what, and what taxes and deductions have come out of who's pay.

After that you're just looking to pass along Employee W4 information and possible Direct Deposit Information if applicable.

The Payroll Company may want to see receipts of tax payments made so far during the current quarter and may ask if there are any taxes due from previous payrolls you would like them to deposit on your behalf.

After your new Payroll Services Company has set up your account, and before you begin processing payroll with them, you'll want to verify that the data in their system matches that of the data on the reports you turned over or uploaded to them.

Verify the Employee Data as well, but its a good best practice to ask your employees to verify their W4 information on their first paystubs also.

Keep an eye out and don't be afraid to ask questions. And while service and results will always vary based on individuals and companies involved, there shouldn't be any technical reason to hold back in making a change in Payroll Services mid-year if you trust the people you're working with and they have a solid history of helping other companies make a transition.