Hi,
Have you ever wonder how payroll service providers make their money? The truth is they don’t make money charging you the service fees, the revenue is generated when you process a payroll and make the tax payments through their service. Whenever you make a tax payment, the payroll service provider will keep those funds in their account until the actual due date. They get the interest from their bank using other people’s money (OPM) and it’s a common approach in this industry. Some of these taxes such as the Social Security (FICA) and Medicare are not due until the 15th of the following month if you’re a monthly depositor. Other taxes such as State Unemployment Insurance (SUI) are not even due until one month after the quarter ends, so the payroll service provider would have your funds in their bank account for a month to several months before they actually pay it to the appropriate federal or state agency.
I guess this method is great if you want the payroll service provider to pay your taxes on time and as long as you paid it, it’s a done deal. The truth is most of you are probably small business owners and need the extra cash flow to keep your business running. If you are like me and would like to keep all your cash until the due date; my suggestion is to find a service provider that will not debit your taxes until the actual day or couple of days before. I’m pretty sure you can use that extra hundred or thousand dollars for other bills.
