A recent small business tax survey sponsored by Intuit's (NASDAQ: INTU) QuickBooks Online Payroll Tax and Direct Deposit Services, suggests that more small businesses than ever before are paying IRS penalties for late or inaccurate payroll tax filings.
Payroll Takes Its Toll on Small Businesses
According to the survey, nearly 40 percent of small business owners polled have been penalized by the IRS for late or inaccurate payroll tax filings -- with the average penalty charge amounting to $845.(1) In 1996, small business owners were assessed $5.4 billion nationwide in tax penalties by the IRS(2). And the QuickBooks Online Payroll Tax and Direct Deposit Services' survey suggests that the number of small businesses being penalized has grown by approximately 7 percent since 1996, when the IRS announced that one-in-three small businesses had been penalized.
Why Small Businesses Are Vulnerable to IRS Penalties
The survey also showed that 63 percent of small businesses believed there were less than 10 government regulations that affected their businesses; and 15 percent had no idea at all how many regulations they needed to comply with. Stawrs, an agency of the IRS which focuses on simplifying tax and wage reporting requirements, estimates between $15 and $17 billion is lost annually in productivity due to the employee tax administrative burden. In 1998, this burden meant that small business owners had to comply with an average of more than 50 government regulations -- many of them new or recently revised -- to satisfy their tax obligations.
"The cost of non-compliance with state and federal taxes is high," said Rene Lacerte, group product manager, Employer Services Group at Intuit. "We designed our QuickBooks Online Payroll Services to offer QuickBooks users an integrated approach to complete payroll management. It's the easiest, most hassle-free way of getting the payroll job done without paying a high price."
Time Spent On Payroll Adds Up
More than 39 percent of small business owners surveyed estimated they spend more than 50 hours a year calculating payroll. This means that small business owners are consumed with managing a twice-monthly payroll, filling out quarterly tax forms, preparing pay period tax deposits and printing W-2's for more than a full work week each year, which takes them away from running their businesses. For example, if a business owner values their time at $100 an hour, then they are spending $5,000 a year on payroll.
Data Shows Using Direct Deposit Greatly Increases Productivity And Saves Money
Direct Deposit is used by nearly 99 percent of Japanese workers, more than 90 percent of European workers, but only about 50 percent of the private sector workforce in the U.S.(3) and only 17 percent of small businesses with less than 20 employees(4).
QuickBooks Online Payroll Tax and Direct Deposit Services asked small business owners to select one of four reasons why they did not use direct deposit. While 17 percent believe that direct deposit is "too much of a hassle," nearly 8 percent were worried about maintaining control, six percent perceived direct deposit to be "too expensive." However, according to the National Automated Clearing House Association (NACHA), employees spend between 8.5 and 24 hours each year going to the bank to cash or deposit their paychecks, which accounts for a loss of productivity estimated at $3-5 billion annually. annually.
"Direct Deposit is now within reach of all small businesses. No matter if there are two employees or 200, it is a cost-effective and convenient payment method that both employers and employees can enjoy," said Lacerte.
QuickBooks Online Payroll Tax and Direct Deposit Services
The QuickBooks Online Payroll Tax Service manages virtually every payroll detail, handling all federal and state payroll tax filings; automating federal and state tax deposits; calculating, printing and mailing W-2s; tracking federal and state payroll tax law changes; and reconciling QuickBooks records automatically. With full integration with QuickBooks 99 and QuickBooks Pro 99, users simply input payroll data into their QuickBooks files as they do now, and push a button -- from any Web-based location with access to the user's QuickBooks 99 data file, at any time of day or night. There's no double-entry and no additional work. And the service is guaranteed to comply with federal and state payroll tax and all EFTPS requirements -- or Intuit pays the resulting payroll tax penalties.(5)
Although prices vary by business, Intuit has made its pricing as simple and straight-forward as possible. Currently, the typical costs for the QuickBooks Online Payroll Tax Service is $20 per month, plus $1 per employee per pay period(6), which equals $30 per month (or $360 per year) for a small business with twice-monthly payroll for five employees.
Intuit's Online Direct Deposit Service, which also is available separately from the Online Payroll Tax Service, allows small businesses to automatically -- and cost-effectively -- pay employees electronically (includes paychecks, expense reimbursements and bonuses). The service, available for $1.50 per pay check per employee, allows the employee to designate up to two direct deposit accounts, and either the employer or the employee may cover the fee.
Since the QuickBooks Online Payroll Tax and Direct Deposit Services were launched in October 1998, nearly 3,000 QuickBooks customers have subscribed to the services. QuickBooks Online Payroll Services support any business using QuickBooks 99. Customers with as many as 200 employees have signed up for the service, but the majority of service subscribers are small businesses with five to 10 employees.
Both the Payroll and Direct Deposit Services are protected with a personal identification number and passwords from within QuickBooks, so users can feel assured their data is well protected.
To sign-up for QuickBooks Online Payroll Tax and Direct Deposit Services, business owners may call 800-332-4844. Participation in the Online Payroll Tax Service is subject to application and approval.
The QuickBooks Online Payroll Tax and Direct Deposit Services' small business tax survey was conducted by International Communications Research (ICR) in December 1998. ICR randomly selected a sample of 500 small businesses in the U.S. employing one to 20 people.
To use QuickBooks Online Payroll Tax and Deposit Services, customers must be a QuickBooks 99 user and have an Internet Service Provider. Each user in a multi-user environment will need his or her own copy of QuickBooks Pro 99 to share data.