Q&A: Should tax planners process payroll for their clients?
At Cirrus Payroll, we’ve seen a need to address how working with a payroll service can help tax planners serve their clients at optimal capacity. In a recent interview with Tyler Winn CPA, President of Cirrus Payroll, we discuss the pain points these professionals face and how they can increase effectiveness as they grow their practice.
Q1: What does processing payroll have to do with tax planning?
A: Tax planners are focused on creating strategies to minimize tax liabilities for their clients. Payroll often comes into play as a part of these overall tax strategies. For example, a tax planner may recommend that a business owner elect S Corporation status for their LLC. In these cases, the owner needs to start taking W-2 payroll as an employee.
For solo practitioners or small tax planning firms, the temptation arises to process payroll as part of the overall tax plan. Since they have built a good level of trust through their expertise and relationship with their client, it’s very possible that the client might even request that the tax planner process their payroll themselves.
Q2: Should you process payroll for your clients?
Tax planners’ reputation is staked on their ability to deliver on tax savings for their clients. Tax planners know that streamlining payroll is one piece of the puzzle, but they often underestimate the time, effort, and most of all – the risk – of running payroll. There are many things that can go wrong when it comes to payroll. Late filings, penalties, interest, IRS notices, tax registrations…the list goes on.
In addition, payroll is not very profitable unless you process a great deal of it. Since they won’t be making much profit by handling payroll, it’s not sensible for tax planners to stake their reputations on it in the event of mistakes.
Q3: What are the main issues tax planners run into when processing payroll?
A: For many tax planners, it’s not until they try to tackle payroll themselves that they realize they don’t have the bandwidth or desire to do so. For one-person operations or smaller firms, they quickly realize that it doesn’t make sense to direct their energy toward payroll. Instead, they should be focusing on the higher level elements of tax planning and strategy. The details of payroll will only serve to decrease the effectiveness of the practice as a whole.
Another issue that comes to mind is a lack of awareness about the different state laws and regulations in regards to payroll. Staying up to date and tracking these details is time consuming, and it’s easy to overlook the fine print. This is a problem because even a small mistake or one missed payment could trigger the IRS to get involved. One simple payroll mistake could call into question the overal skill and expertise of a tax planner. It’s simply not worth it.
Q4: How does Cirrus Payroll solve these issues?
A: As a full service payroll company, our systems are designed to make payroll as seamless and effective as possible. Our team of professionals is stay continuously up to date on all state regulations. We not only provide exceptional service to our clients, but also coordinate directly with our clients’ tax planners and tax preparers. Each account has its own dedicated point of contact which leads to a partnership that tax planners can rely on.
Since Cirrus Payroll operates under the guidance of a CPA, we understand client needs beyond just payroll. We’re able to come alongside as a piece of the puzzle the tax planner is putting together, and help the client understand where payroll fits into the big picture.
Q5: Does Cirrus Payroll work with all types of tax planners?
We are open to working with any tax professionals, but tend to work with smaller firms and solo practitioners. Since we are a remote company, we partner with firms across the U.S.A.
Q6: What does a partnership with Cirrus Payroll look like for tax planners?
At Cirrus Payroll, there are three different partnership models we use with tax planners.
The first model is a straightforward Referral Partnership. Once we build a relationship with a tax planner and they have a client payroll need, the tax planner simply connects us with the client via email. We then take the time to understand their needs, send them a quote, and set up their account. We also give the tax planner third party access into the account (if they desire it) so there is transparency and access to reports.
The next model is a Wholesale Program. This partnership is the same as the above, but Cirrus bills the tax planner (at a reduced rate) rather than the client. We use a tiered structure and reduce the rate as the tax planner brings on more clients. The Wholesale Program is available even if the tax planner only brings on just one client.
The last model is a Revenue Sharing Partnership. This is a referral model, but Cirrus will pay out a portion of the processing revenue to the tax planner. To enter into this partnership, the tax planner must bring a minimum of five clients to Cirrus. The clients are billed directly in this model.
Q7: How can tax planners get in touch with Cirrus to explore a potential partnership?
To learn more or to contact Cirrus to discuss partnership options, visit the Accountants page on our website.
To book a call directly with Cirrus Payroll’s founder and president, Tyler Winn CPA, follow this link.