Gusto - What Real Assisted Payroll Looks Like

We have a new client who is switching over from using a payroll service that includes the following features.

Now, keep in mind that every single payroll software on the market (that I know of) includes every single one of these features with the possible exception of:

  • Payroll setup completed for you
  • No tax penalties
  • Free expert support

Everything else is embedded in the software, and payroll software has existed for decades.

These other features, however, are the high ticket items. They require people and expertise. These are the features that make a business owner choose one service over another.  

Business owners did not start a business to learn about frickin’ payroll taxes. They just want to adhere to the law without pulling their hair out, and payroll services that help them set things up right and make sure they don’t go off the rails is invaluable for providing peace of mind.

Hold that thought as I tell you about my experience with my new client this week.

The Issue

One of the first things we do when we onboard a new client is move them over to Gusto (which we fell in love with as ZenPayroll a couple of years ago) from whatever payroll service they used to be on.  

In this case, we were moving our client from the above “assisted” service.

As I was converting them to the new system, Gusto’s system was nice enough to point out that the FICA taxes (Social Security and Medicare) on their wages were too high all year. Well, that was nice of Gusto, but - what the heck?  So I dove in a bit. Sure enough, the client had employees with health insurance premiums that were being taxed when they should not have been.

Payroll Setup Completed For You

The problem was that the health insurance was not set up with the right “payroll item type” during the initial setup. Keep in mind that this is one of the most common payroll items out there: employer-provided health insurance.  

This was bad for both the employees and the business owner because BOTH were paying too much in payroll taxes by hundred of dollars.

But ok, everyone makes mistakes. Let’s just make sure it gets fixed.

So I contacted the client and informed them that their payroll was set up wrong, and as a result, payroll was wrong all year. They needed to contact their payroll provider and amend their Forms 941 for the first three quarters so they could get a refund on their overpaid FICA.

Free Expert Support

The payroll provider was contacted by the client, and here’s the response from my client:

They weren’t very helpful. They kept asking me where we want the money to go (as in line item on a tax form). I told them, “I don’t know - that’s why I hired them to do my outsourced payroll.”

Here’s a tip to all payroll service providers.  Your customers want you to know more than they do about payroll. That’s what you do all day, every day, and it’s literally why they are paying you. It shouldn’t be too much to ask.

I ended up discussing his health insurance plan with him, confirming it was a cafeteria plan, and then I told him the line item to tell his payroll provider to use, and back to the provider he went.

Their recommended solution to the problem was to move the year-to-date amount from one payroll item (with the wrong tax type) to a new payroll item (with the correct tax type). They told him that because it only affected deductions, there was no need to file amended quarterly returns, and he should only care about fixing the W-2s at this point.

Umm… no.

If it only affected deductions, there would be no reason to contact them and point out the errors in the first place. Just the simple fact that you’re moving from one tax type to a different tax type should clue them in that the tax liability was adjusted, and therefore, previous tax filings needed to be amended. Otherwise, I don’t understand how he and his employees would get a refund on the payroll taxes they’ve been overpaying all year long.

So much for “expert” payroll support.

No Tax Penalties

No tax penalties is a good “feel good” feature, and it’s nice to know that if a big mistake is made, the IRS won’t come back and assess a big ole’ fine, so I don’t want to discount this value.

However, the fact that the payroll provider didn’t understand or care about the hundreds of dollars of overpaid payroll taxes is disheartening and is absolutely a disservice to my client. Just because there aren’t any assessed penalties doesn’t imply the service is error-free or can’t create costly mistakes.  And did I mention that the client had to pay to amend all the returns?   

How Real Assisted Payroll Should Be Done

Now, the good thing about all of this is that it reminds me of why I chose Gusto in the first place and why I continue to see them as the up and coming leader in this industry. (And no, this is not a paid endorsement. I don't do that. I'm just a really big fan and like to share the love.)

Gusto fundamentally understands what is important to business owners. If we ever run into an IRS or state notice, we just email it into Gusto, and they tell us exactly what the issue is and what needs to be done to fix it. If they can, they’ll fix it themselves on the back end and just let us know when it’s done.

They have software that’s easy to set up and operate, but if there’s something we don’t understand, they take the time to explain it to us in English instead of pointing us to a random help screen. And better yet, usually they’ll just fix whatever it is themselves to save us the trouble.  

They are also constantly evolving to meet the needs of business owners. Last year they started providing workers’ compensation insurance. This year they added health insurance benefits, more HR tools, and 401(k) plans.  

A small business owner can now set up plans easily and affordably and have them integrate seamlessly with payroll. Anyone who has ever worked with payroll and tried to keep track of all the various deductions or deals with workers’ compensation audits understands how truly awesome this is.

Now, this is what assisted payroll really looks like.