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Do I really need payroll software, or can I do payroll myself / use an accountant?

✓ Verified Last reviewed by AnswerStack Next review due Oct 20, 2026

Direct answer

Every claim is sourced below

Payroll software is optional rather than mandatory, because the IRS publishes the withholding methods in Publication 15-T, the deposit rules in Publication 15, and the forms themselves, so you can legally run payroll on a spreadsheet if you meet every deadline yourself.[1] What settles it is complexity and penalty exposure more than headcount, since a late federal tax deposit costs 2 percent at 1 to 5 days late, 5 percent at 6 to 15 days, 10 percent past that, and 15 percent once the IRS has sent a notice.[1][2][3] Full service payroll that calculates, deposits, and files for you starts near $29 to $49 a month plus $6 to $7 per worker, less than one hour of CPA time at about $100 an hour for payroll work.[11][12][14] Doing it yourself holds up for one or two salaried people in a single state, a bookkeeper or CPA fits where payroll sits inside a wider accounting relationship, and software becomes the practical answer once you add a second state, variable overtime, or deductions that change taxable wages.[9][10]

Do you actually need payroll software?

No law requires payroll software. The IRS publishes the federal income tax withholding methods in Publication 15-T and the deposit calendar, rate tables, and filing rules in Publication 15, so an employer with a spreadsheet and a working knowledge of those two documents can run payroll lawfully through the year-end Form W-2.[1] Three arrangements are genuinely in play: doing it yourself, paying a bookkeeper or CPA for their hours and judgment, or subscribing to software that calculates, deposits, and files under your own employer identification number.[1][12][13]

What actually drives the decision

Complexity matters more than headcount. A single owner drawing a fixed S corporation salary in one state files the same four returns every year, and a spreadsheet handles that fine. A ten person restaurant with tipped wages, a different overtime figure every week, and one wage garnishment produces a fresh calculation every pay period, which is where hand arithmetic starts generating notices.

Crossing state lines changes the arithmetic sharply, because each state sets its own unemployment taxable wage base and the 2026 figures run from $7,000 in California, Florida, and Tennessee up to $78,200 in Washington.[9] Every state adds a registration, a rate notice, and another filing schedule.

Worker type sets the floor. Genuine independent contractors need no withholding and no Form 941, leaving a batch of 1099-NEC forms at year end.[1] The first person you put on a W-2 switches on the whole deposit and filing cycle, and two hours a month of your own time already costs more than the cheapest subscription.[11]

How do the three approaches compare on cost, time, and risk?

The three approaches do not rank the same way on every measure. Hand-run payroll carries no subscription cost but the most hours and the most penalty exposure, and that balance shifts once payroll gains moving parts.

Approach Typical cost Your time per pay run Risk you carry Fits best when
Manual or spreadsheet $0, plus your hours 1 to 3 hours with the deposit All of it, including 2 to 15 percent deposit penalties and personal liability for unpaid withheld tax [1][5] One or two salaried people, one state, no deductions
Software you file with yourself About $17 plus $4 per worker [10] 15 to 30 minutes, plus filings Deposit and filing deadlines stay yours [10] You want the math handled but prefer to file returns
Bookkeeper or CPA $30 to $90 an hour, near $100 for CPA payroll work [13][14] Minutes, once you send hours Errors are theirs to fix, but IRS notices come to you [5] Payroll is one piece of a broader engagement
Full service payroll software $29 to $49 plus $6 to $7 per worker [11][12] 5 to 15 minutes Vendor files and deposits, though you own what you enter [11][12] Several employees, multiple states, benefits or garnishments

Costs stack rather than substitute in the middle option, because a bookkeeper or CPA running your payroll is paying for a platform too.[13][14]

What does running payroll yourself actually involve?

Running payroll yourself is a recurring compliance routine more than a calculation. None of the pieces below is hard in isolation, but they repeat on fixed dates, and every state where you have employees adds its own version of the same list.

Registration and enrollment

You need an employer identification number before you pay anyone, plus state withholding and unemployment accounts in each state where you have employees. New employers that flag a federal tax obligation on the EIN application are pre-enrolled in the Electronic Federal Tax Payment System and mailed a PIN to activate.[1]

Calculating each paycheck

Federal income tax withholding comes from the methods and tables in Publication 15-T, keyed to the employee's Form W-4.[1] Social security tax is 6.2 percent each for employer and employee on wages up to the 2026 base of $184,500, Medicare is 1.45 percent each with no cap, and bonuses are withheld at a flat 22 percent.[1]

Depositing on schedule

A lookback period fixes your deposit schedule before the year starts. Report $50,000 or less of employment tax in that period and you deposit monthly, by the 15th of the following month; report more and you deposit semiweekly, on dates that follow each pay date rather than the calendar.[1] Every federal deposit moves by electronic funds transfer.[1]

Returns and year-end statements

Form 941 is due April 30, July 31, October 31, and January 31, even in quarters with nothing to report.[1] Form 940 is due January 31, and FUTA runs 6.0 percent on the first $7,000 of wages, cut to 0.6 percent by the standard 5.4 percent state credit.[1] Forms W-2 go to employees and, with Form W-3, to the Social Security Administration by January 31 through Business Services Online, and electronic filing is mandatory once your information returns reach 10, counting Forms W-2 and 1099 together.[7]

Records

Employment tax records have to be kept at least four years.[1] The Fair Labor Standards Act separately requires a payroll record for every nonexempt employee showing hours worked each workday and workweek, the regular hourly rate, straight time earnings, overtime premium pay, additions and deductions, and the date of payment with the pay period covered.[8]

What does getting payroll taxes wrong actually cost?

Late deposits are penalized on a sliding scale that gets expensive quickly. The IRS charges 2 percent for deposits 1 to 5 days late, 5 percent at 6 to 15 days, 10 percent at 16 or more days, and 15 percent on amounts still unpaid more than 10 days after the first IRS notice.[1][2] Those tiers are statutory rather than discretionary, written into 26 U.S.C. 6656, and they do not stack, so a deposit 20 days late is penalized at 10 percent rather than at 2 plus 5 plus 10.[3] The same 10 percent applies to amounts paid directly to the IRS instead of deposited, and interest then runs on the penalty itself.[1][2]

Filing late is charged separately from depositing late, at 5 percent of the tax due for each month or part of a month a return is late, to a maximum of 25 percent.[4]

Wrong or late W-2s carry their own schedule. For 2026 the penalty is $60 per form corrected within 30 days, $130 if corrected by August 1, $340 after that or if you never file, and $680 for intentional disregard, applied per information return or payee statement.[6]

The largest exposure is personal. Withheld income tax and the employee share of FICA are trust fund taxes, and when they are not paid over the IRS can assess the trust fund recovery penalty against any responsible person with authority to direct payment.[5] It equals the full unpaid trust fund amount, and willfulness only requires that the person knew or should have known about the outstanding taxes and was plainly indifferent.[5]

When is a bookkeeper or CPA the better answer?

A bookkeeper or CPA earns the premium where payroll sits inside a wider engagement and your open questions are about judgment rather than arithmetic. Published 2026 pricing guides put bookkeeper hourly rates at roughly $30 to $90, with monthly retainers commonly $300 to $1,500 depending on scope.[13] For payroll specifically, accounting firms report an average CPA rate near $100 an hour, individual accountants at $100 to $200, and some firms billing $20 to $60 per pay run plus $1 to $3 per employee.[14]

That money buys the part software cannot do. Worker classification, reasonable compensation for an S corporation owner, the taxable treatment of a fringe benefit, and whether a remote hire has created a filing obligation in a new state are judgment calls, and getting one wrong costs far more than any subscription.

Two caveats come with the arrangement. Almost every accountant runs your payroll inside a platform they pay for, so their fee is software plus time.[13] Responsibility also stays where it started, because IRS notices go to the employer and the trust fund recovery penalty attaches to responsible people inside your business rather than to your accountant.[5] A deposit due Wednesday is still due Wednesday if your bookkeeper is out, so this works best with a named backup and a written cutoff for sending hours.

What does payroll software cost at small headcounts?

Full service payroll for a handful of employees runs between about $50 and $110 a month at current published rates. Patriot Software lists Basic Payroll at $17 a month plus $4 per worker paid and Full Service Payroll at $37 plus $5, where the difference is that Full Service files and deposits federal, state, and local payroll taxes and includes year-end filings at no extra fee.[10] SurePayroll starts at $29 plus $7 per worker with federal and state taxes filed and deposited automatically.[11] OnPay charges $49 plus $6 per worker, covering federal, state, and local filings, W-2s and 1099s, and workers in any number of states.[12]

Three employees on Patriot Full Service comes to $52 a month, or $624 a year. The same three cost $50 on SurePayroll and $67 on OnPay, and at ten employees OnPay is $109 a month against $87 for Patriot.[10][11][12]

Multi-state pricing is the line item that catches people out. Patriot adds $12 a month per additional state and SurePayroll charges $9.99 for multi-state payroll, while OnPay includes every state in its base rate, so the cheapest single state option is not necessarily cheapest once you hire across a border.[10][11][12] Set that against the penalty math: a 10 percent late deposit penalty on a $6,000 federal tax deposit is $600, roughly a year of software for a three person payroll.[2][10]

Which triggers mean you have outgrown doing payroll yourself?

Six specific events change the work enough that hand calculation stops being reasonable, because each adds either a new filing relationship or a figure that moves every pay period.

Trigger What changes Why hand calculation breaks down
You hire in a second state A new withholding account, unemployment account, rate, and calendar 2026 state unemployment wage bases run from $7,000 to $78,200, tracked per state [9]
Your first W-2 employee replaces contractors Withholding, deposits, Forms 941 and 940, and Form W-2 all begin Contractors need only a 1099-NEC; employees start the full deposit cycle [1][7]
You add benefits deductions or retirement deferrals Pre-tax and post-tax deductions change taxable wages differently for each tax One deduction can cut income tax wages without cutting social security wages [1]
A garnishment order arrives Court ordered withholding with its own cap, priority, and remittance address The order sets the math, and the money is remitted outside tax deposits
You employ tipped or overtime heavy hourly staff The regular rate and overtime premium recalculate every workweek P.L. 119-21 added separate reporting for qualified tips and qualified overtime [1]
Your lookback liability passes $50,000 Monthly deposits become semiweekly deposits Due dates follow pay dates within the week, not one fixed monthly date [1]

A second state

Each new state brings two registrations, an experience rate that changes annually, and its own filing schedule. Because the 2026 taxable wage bases range from $7,000 to $78,200, an employee who relocates mid-year can hit two separate caps.[9]

Contractors becoming employees

Contractors need no withholding and no quarterly return, so year end is a batch of 1099-NEC forms.[1] The first W-2 employee starts deposits, Forms 941 and 940, and the January 31 filing with the Social Security Administration.[7]

Benefits deductions and retirement deferrals

A traditional 401(k) deferral reduces federal income tax wages while staying subject to social security and Medicare tax, and a Section 125 premium reduces both, so each deduction needs its own treatment.[1]

Garnishments

A garnishment carries a legal cap on disposable earnings, a priority order against anything else you hold, and a remittance schedule to a court or agency, all outside your tax deposits.

Tipped and overtime heavy hourly staff

Overtime premium is based on the regular rate, which recalculates whenever hours or non-discretionary pay change, so no two weeks look alike. P.L. 119-21 added separate treatment for qualified tips and qualified overtime.[1]

Moving to semiweekly deposits

Once lookback liability passes $50,000, deposits follow pay dates within the week rather than the 15th, and the first late one is penalized on the same 2 to 15 percent scale.[1][2]

How this answer was researched · AnswerStack

This answer draws on federal primary sources rather than vendor marketing. The penalty percentages, deposit schedules, wage bases, and filing deadlines come from the 2026 edition of IRS Publication 15 and the IRS penalty pages, read on July 20, 2026, and the statutory tiers were confirmed against the text of 26 U.S.C. 6656.[1][2][3] Software prices were taken from vendor pricing pages the same day.[10][11][12] Rates for bookkeepers and CPAs come from published industry pricing guides rather than a formal wage survey, so those figures appear as ranges and carry less weight than the tax numbers.[13][14]

The AnswerStack Editorial Team sells no payroll product and accepts no vendor compensation. If you run payroll for a living, or work for a provider named here, corrections are welcome, particularly on state registration steps, which vary too much to cover well on one page. Nothing here is legal or tax advice.

This answer was written and reviewed by the AnswerStack Editorial Team, which has no commercial stake in the products, companies, or methods discussed. Every claim is cited inline and verified on the dates shown.

What payroll software does not do

It does not move the legal responsibility

The employer on the hook for the tax is still you. IRS notices arrive addressed to your business, and the trust fund recovery penalty is assessed against responsible people inside your organization rather than a software vendor.[5] Authorizing a reporting agent changes who presses the buttons, not who owes the money.

It does not decide who is an employee

Payroll platforms pay whoever you set up, in the way you set them up. Classification follows common law rules, and a platform will issue 1099-NEC forms to people who should have been on a W-2 without raising the question.[1]

It does not register you with the states

Most providers require an existing state withholding account number and unemployment account number before they can file for you. Registration remains your job, and in some states it takes weeks.

It is not tax advice

Reasonable compensation for an owner, and whether a remote hire creates a filing obligation in a new state, are questions a subscription does not answer. Nothing on this page is legal or tax advice, federal figures are current for 2026, and state requirements vary.

Sources

Publication 15 (Circular E), Employer's Tax Guide (2026)

Internal Revenue Service

Primary source Verified Jul 20, 2026 Supports: 2026 social security rate 6.2% and wage base $184,500; Medicare 1.45% with no cap; supplemental wage withholding 22%; EFTPS pre-enrollment with the EIN; federal tax deposits by electronic funds transfer; $50,000 lookback threshold for monthly vs semiweekly; $100,000 next-day deposit rule; deposit pe

“2% Deposits made 1 to 5 days late. 5% Deposits made 6 to 15 days late. 10% Deposits made 16 or more days late, but before 10 days from the date of the first notice the IRS sent asking for the tax due. 15% Amounts still unpaid more than 10 days after the date of the first notice.”

Failure to Deposit Penalty

Internal Revenue Service

Primary source Verified Jul 20, 2026 Supports: Penalty tiers by calendar days late for employment tax deposits, and interest charged on penalties

“1-5 calendar days: 2% of your unpaid deposit. 6-15 calendar days: 5%. More than 15 calendar days: 10%. More than 10 calendar days after the date of your first notice or letter: 15%. We charge interest on penalties.”

26 U.S.C. 6656, Failure to make deposit of taxes

Office of the Law Revision Counsel, U.S. House of Representatives

Primary source Verified Jul 20, 2026 Supports: Statutory basis for the 2%, 5%, 10% and 15% applicable percentages, applied by length of failure rather than compounded

“2 percent if the failure is for not more than 5 days, 5 percent if the failure is for more than 5 days but not more than 15 days, 10 percent if the failure is for more than 15 days.”

Failure to File Penalty

Internal Revenue Service

Primary source Verified Jul 20, 2026 Supports: 5% of tax due per month or partial month late, to a maximum of 25%

“The penalty is 5% of the tax due (less any tax paid on time and available credits) for each month or partial month the return is late... The penalty accrues up to a maximum of 25%.”

Employment taxes and the Trust Fund Recovery Penalty (TFRP)

Internal Revenue Service

Primary source Verified Jul 20, 2026 Supports: Penalty equals the unpaid balance of trust fund tax, who counts as a responsible person, and the willfulness standard requiring no evil intent or bad motive

“The amount of the penalty is equal to the unpaid balance of the trust fund tax... a responsible person has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes... no evil intent or bad motive is required.”

Information Return Penalties

Internal Revenue Service

Primary source Verified Jul 20, 2026 Supports: 2026 per-return penalty amounts of $60, $130, $340 and $680 for intentional disregard, applied per information return or payee statement

“Up to 30 days late: $60. 31 days late through Aug. 1: $130. After Aug. 1 or not filed: $340. Intentional disregard: $680.”

General Instructions for Forms W-2 and W-3

Internal Revenue Service

Primary source Verified Jul 20, 2026 Supports: Forms W-2 and W-3 filed with the Social Security Administration; Business Services Online supports keying up to 50 Forms W-2 or uploading a wage file; electronic filing required once total information returns reach 10, counting Forms W-2 with the 1099 and 1098 series

“The SSA's Business Services Online (BSO) website makes e-filing easy... you can create, save, print, and submit up to 50 Forms W-2 at a time... You must e-file if you are required to file at least 10 information returns.”

29 CFR 516.2: Employees subject to minimum wage or minimum wage and overtime provisions

Legal Information Institute, Cornell Law School

Primary source Verified Jul 20, 2026 Supports: FLSA payroll recordkeeping items required for each nonexempt employee, including hours worked each workday and workweek, regular hourly rate, straight time earnings, overtime premium pay, additions and deductions, and date of payment with pay period covered

“Hours worked each workday and total hours worked each workweek... Total daily or weekly straight-time earnings or wages... Total premium pay for overtime hours... Date of payment and the pay period covered by payment.”

2026 state unemployment insurance taxable wage bases

EY Tax News Update

Independent Verified Jul 20, 2026 Supports: 2026 state unemployment taxable wage bases range from $7,000 in states including California, Florida and Tennessee to $78,200 in Washington, and four states lowered their base for 2026

“The lowest state wage base is $7,000... the highest is Washington at $78,200. The wage base for 2026 is lower than 2025 in four states: Iowa, Louisiana, Missouri and Oklahoma.”

Payroll Software Pricing

Patriot Software

Primary source Verified Jul 20, 2026 Supports: Basic Payroll $17 a month plus $4 per worker paid; Full Service Payroll $37 plus $5 with federal, state and local tax filings and deposits plus year-end filings at no additional fee; multi-state filing $12 per month per additional state

“Basic Payroll $17/mo + $4 per worker paid. Full Service Payroll $37/mo + $5 per worker paid... Federal tax filings & deposits, State tax filings & deposits, Local tax filings & deposits... Multi-state filing $12 per month, per state.”

SurePayroll Pricing

SurePayroll

Primary source Verified Jul 20, 2026 Supports: Small business payroll starting at $29 a month plus $7 per worker with federal and state payroll taxes filed and deposited; multi-state payroll $9.99 a month; nanny and household payroll from $45 a month including one employee

“Starting at $29/month... $7/worker... Multi-state payroll $9.99/month... Nanny & Household Payroll starting at $45/month, includes one employee.”

OnPay Pricing

OnPay

Primary source Verified Jul 20, 2026 Supports: $49 a month plus $6 per worker including federal, state and local tax filings, W-2s and 1099s, unlimited pay runs, workers in any number of states, and no implementation or integration fees

“Get everything we do starting at $49/month + $6/worker... Federal, state, and local tax filings included... Pay workers in as many states as you need... No implementation or integration fees.”

Bookkeeping Pricing Guide 2026: How Much to Charge

Relay

Independent Verified Jul 20, 2026 Supports: 2026 bookkeeper hourly rates of $30 to $90 and monthly retainers commonly $300 to $1,500 for standard engagements, with payroll bundled into higher tiers

“In 2026, hourly rates range from $30 to $90 per hour, while monthly retainers typically fall between $300 and $1,500 for standard engagements.”

Accountant Payroll Service Costs: A Comprehensive Guide

Focus CPA Group

Supporting Verified Jul 20, 2026 Supports: Average CPA rate for payroll services near $100 an hour, individual accountants at $100 to $200 an hour, and per pay run fees of $20 to $60 plus $1 to $3 per employee

“The average CPA rate for payroll services is $100 per hour... ranges from $20 to $60 as a base fee every time you run payroll, plus an extra fee of $1 to $3 per employee.”

Revision history

2 revisions since publication
v1.1 Reviewed and re-verified.
v1.0 Published after editorial review.