Yes, accountants do payroll, and for most small and mid-sized businesses it is one of the core services they provide. The work covers calculating each employee’s gross wages, applying the right federal and state withholdings, depositing taxes with the IRS on schedule, filing quarterly and annual returns, issuing pay through direct deposit or check, and preparing W-2s at year-end. Fees generally run a monthly base plus a per-employee charge.
What an Accountant Actually Does Each Pay Period
The first task each cycle is figuring out what every employee earned. For salaried staff, the number is fixed by the employment agreement. For hourly workers, the accountant multiplies hours by rate and adds overtime at one and a half times the regular rate for any hours over 40 in a workweek for covered employees.1U.S. Department of Labor. Overtime Pay
From gross wages, the accountant subtracts mandatory deductions (federal income tax withholding, Social Security, Medicare, and any applicable state and local taxes) and voluntary deductions the employee elected, such as 401(k) contributions or health insurance premiums. What is left is net pay.
Social Security withholding runs 6.2 percent of wages with a matching employer share, and Medicare is 1.45 percent from each side.2Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Once an employee crosses $200,000 in wages during the year, the accountant also withholds an Additional Medicare Tax of 0.9 percent, with no employer match on that portion.3Internal Revenue Service. Questions and Answers for the Additional Medicare Tax Social Security stops for the year once the employee’s wages pass the annual base ($184,500 in 2026), and missing that cutoff over-withholds from the paycheck.4Social Security Administration. Contribution and Benefit Base
Garnishments
When a court order or tax levy comes in, the accountant calculates the correct withholding and sends the funds to the right party. Federal law caps most consumer garnishments at the lesser of 25 percent of disposable earnings or the amount by which weekly disposable earnings exceed 30 times the federal minimum wage, with higher limits for child support and no cap at all for IRS tax levies.5Office of the Law Revision Counsel. 15 US Code 1673 – Restriction on Garnishment Multiple garnishments with different priority rules are one of the trickier corners of payroll, and mishandling the order can leave the employer on the hook.
Depositing Taxes and Filing Returns
Running payroll is not just about cutting paychecks. The larger part of the job is moving withheld taxes to the government on time and reconciling them on the right forms.
The IRS assigns each employer either a monthly or semiweekly deposit schedule based on a lookback period, and any employer that accumulates $100,000 or more in taxes on a single day has to deposit by the next business day regardless of schedule.6Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide7Internal Revenue Service. Employment Tax Due Dates Late deposits carry escalating penalties that can reach 15 percent after the IRS issues a notice demanding payment.8Internal Revenue Service. Failure to Deposit Penalty
On top of deposits, the accountant files:
- Form 941 each quarter, reporting withheld income tax and both shares of Social Security and Medicare. Filing late runs 5 percent of unpaid tax per month, up to 25 percent.9Internal Revenue Service. About Form 941, Employer’s Quarterly Federal Tax Return10Internal Revenue Service. Failure to File Penalty
- Form 944 annually instead of 941, but only for very small employers whose combined annual liability is $1,000 or less and who have received IRS permission to use it.11Internal Revenue Service. About Form 944, Employer’s Annual Federal Tax Return12Internal Revenue Service. Certain Taxpayers May File Their Employment Taxes Annually
- Form 940 once a year for federal unemployment tax, which is paid entirely by the employer at 6.0 percent on the first $7,000 of each employee’s wages, reduced to an effective 0.6 percent for employers who pay state unemployment on time.13Internal Revenue Service. FUTA Credit Reduction14Internal Revenue Service. About Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
- State unemployment insurance filings and state income tax withholding returns where applicable, each with its own deadlines and penalty rules.
Why Deposit Deadlines Are Non-Negotiable
Withheld income tax and FICA are considered held “in trust” for the government. If a business fails to deposit them, the IRS can assess the Trust Fund Recovery Penalty equal to the full unpaid amount against any person who was responsible for making the deposits and willfully failed to do so. Responsible person status covers owners, officers, and anyone with authority to direct company funds, and choosing to pay a vendor instead of depositing payroll taxes is enough to establish willfulness.15Internal Revenue Service. Employment Taxes and the Trust Fund Recovery Penalty (TFRP) The penalty attaches to the individual personally, which is a large part of why business owners hand payroll to an accountant.
Setup and Documentation the Accountant Handles
Before the first payroll, the business needs a Federal Employer Identification Number, obtained through Form SS-4, plus registrations for state unemployment insurance and, where applicable, state income tax withholding.16Internal Revenue Service. Instructions for Form SS-4 – Application for Employer Identification Number (EIN) An accountant will typically walk the business through these registrations if they are not already in place.
For each new hire, the accountant collects Form W-4 to determine federal income tax withholding.17Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate The employer must also complete Form I-9 to verify identity and work authorization, and keep it on file for three years after the hire date or one year after employment ends, whichever is later.18U.S. Citizenship and Immigration Services. I-9, Employment Eligibility Verification Direct deposit setup adds a bank routing and account number, usually through an authorization form or a voided check.
Federal law requires every new hire to be reported to the state Directory of New Hires within 20 days, using the employee’s name, address, and Social Security number along with the employer’s information.19Office of the Law Revision Counsel. 42 US Code 653a – State Directory of New Hires Business owners doing payroll themselves often miss this step entirely; a payroll accountant does it as a matter of routine.
Employment tax records have to be kept for at least four years after the fourth quarter return for that year is filed, covering time records, W-4s, deposit receipts, and copies of filed returns.20Internal Revenue Service. Employment Tax Recordkeeping Some states require longer, so accountants generally advise retaining records on the longer end.
Worker Classification
Before anyone gets processed as an employee, the accountant confirms they should be an employee rather than an independent contractor. Treating an employee as a contractor skips income tax withholding, the employer’s FICA share, and unemployment contributions, so misclassification produces back taxes, penalties, and interest when the IRS catches it.
The IRS looks at three categories: behavioral control (does the business direct how and when the work is done), financial control (does the business control equipment, expenses, and the economic side of the arrangement), and the type of relationship (written contract, benefits, expectation of an ongoing engagement).21Internal Revenue Service. Employee (Common-Law Employee) No single factor decides it. When the call is genuinely unclear, either the business or the worker can file Form SS-8 to ask the IRS for a formal determination.22Internal Revenue Service. About Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding
Delivering Pay and Closing Out the Year
Most payroll today moves through the Automated Clearing House network. The accountant initiates the direct deposit batch a day or two ahead of payday so funds land in employee accounts by roughly 9 a.m. on the scheduled date.23Nacha. The ABCs of ACH Paper checks remain available for employees who prefer them.
Federal law does not require pay stubs, but most states do require a written or electronic statement showing gross pay, deductions, and net pay for each period.24U.S. Department of Labor. Fair Labor Standards Act Advisor – Are Pay Stubs Required? Accountants generally issue stubs regardless, both for the employee and for the business’s own audit trail.
At year-end, the accountant prepares Form W-2 for every employee summarizing wages and taxes withheld. For the 2026 tax year, W-2s must be furnished to employees and filed with the Social Security Administration by February 1, 2027, and extensions are granted only in extraordinary circumstances.25Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026) Businesses filing 10 or more information returns in a year, counting W-2s together with 1099s and similar forms, must file electronically.26Internal Revenue Service. 2026 General Instructions for Forms W-2 and W-3 That threshold is low enough that paper filing is realistic only for the smallest employers.
What It Costs
Payroll accountants typically charge a monthly base fee plus a per-employee charge. Base fees commonly run from around $20 to $300 per month depending on complexity and scope, with per-employee fees roughly $5 to $15 per person. Businesses with workers across multiple states, frequent garnishments, or complex benefits should expect the higher end. Some accountants bundle payroll into a broader bookkeeping engagement; others price it as a standalone service.
Software-only payroll platforms cost less, but they push the compliance work back onto the business owner. The owner is then the one tracking deposit deadlines, filing 941s, watching wage bases, and keeping current with rate changes. For a business where a Trust Fund Recovery Penalty or a misclassification finding would be serious, paying an accountant who does this every day is usually cheaper than the first mistake.