Payroll Services

Payroll is one of the highest-risk areas of small business operations. Federal and New York State payroll tax requirements are strict, deadlines are unforgiving, and the penalties for errors — particularly for payroll tax deposit failures — are severe. Myung Keon Kim CPA handles payroll processing from start to finish, so business owners can focus on running the business rather than navigating employment tax compliance.

What Full-Service Payroll Includes

• Payroll processing — calculating gross wages, withholdings, and net pay for each employee each pay period
• Tax withholding — federal income tax (using W-4 allowances), Social Security (6.2%), Medicare (1.45%), New York State income tax, New York City income tax (for NYC residents), and New York State disability insurance (DBL)
• Employer tax deposits — timely EFTPS deposits of federal payroll taxes; ACH deposits for New York state withholding
• Quarterly Form 941 — Employer's Quarterly Federal Tax Return, due April 30, July 31, October 31, January 31
• Annual Form 940 — Federal Unemployment Tax Return (FUTA); 6.0% on the first $7,000 of each employee's wages (IRC §3301, §3306(b)(1)), less a credit of up to 90% of that tax for timely state unemployment contributions (§3302(c)(1)) — an effective rate of 0.6%. Employers in states carrying outstanding federal unemployment loans get a reduced credit and pay more; the Department of Labor publishes the affected states each year
• New York State payroll returns — NYS-45 (Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return)
• Year-end W-2/W-3 preparation and filing
• New hire reporting to the New York State Department of Labor

Federal Payroll Tax Deposits: Getting the Timing Right

The IRS assigns each employer to either a monthly or semi-weekly deposit schedule based on prior year payroll tax liability. Monthly depositors pay all employment taxes accumulated during a month by the 15th of the following month. Semi-weekly depositors deposit taxes for paydays on Wednesday, Thursday, or Friday by the following Wednesday; paydays on Saturday, Sunday, Monday, or Tuesday are due by the following Friday. The one-day deposit rule applies if you accumulate $100,000 or more in employment taxes on any single day — those must be deposited the next business day.

The failure-to-deposit penalty is significant: 2% for deposits 1–5 days late, 5% for 6–15 days late, 10% for more than 15 days late, and 15% if the IRS must issue a demand for payment. We handle all deposit scheduling and execution, with confirmation tracking to ensure every deposit is made on time.

The Trust Fund Recovery Penalty

This is the most important payroll tax concept every business owner should understand. When an employer withholds federal income tax, Social Security, and Medicare from employee wages, those withheld amounts are "trust fund" taxes — held in trust for the IRS. If the business fails to deposit these amounts, the IRS can assess the Trust Fund Recovery Penalty (TFRP) under §6672 against any individual who is a "responsible person" — typically the business owner, but also any officer, director, or bookkeeper who had authority to pay creditors and willfully chose not to pay the IRS.

The TFRP equals 100% of the unpaid trust fund taxes and is assessed personally — meaning it survives bankruptcy and cannot be discharged. It is one of the IRS's most powerful and most used collection tools. We prevent TFRP exposure by ensuring deposits are always made on time, before any other business expense is paid. If a client is already behind on payroll tax deposits, we help structure a resolution — payment plan, Currently Not Collectible status, or Offer in Compromise — as soon as possible.

New York State Payroll Compliance

New York employers have obligations beyond federal requirements:

• New York Paid Family Leave (NYPFL): Employee-funded through payroll deductions (0.432% of wages, up to $411.91 per year). Provides up to 67% of the statewide average weekly wage for up to 12 weeks of leave for qualifying family reasons. We handle the deduction calculation and reporting on the NYS-45.
• New York Disability Benefits Law (DBL): Short-term disability insurance, employee-funded at 0.5% of wages up to $0.60/week. Employers must maintain coverage through the New York State Insurance Fund or an approved private insurer.
• Minimum wage compliance: New York City and Long Island/Westchester minimum wage is $17.00/hour. Tipped employees in restaurants have a lower minimum cash wage with tip credits, subject to specific rules.
• Wage Theft Prevention Act: New York requires written wage notices for all new hires and whenever pay rates change, plus regular pay stubs showing all required information. Failure to comply results in statutory penalties of up to $50 per employee per week.

Payroll for S-Corporation Owners

S-Corp shareholders who work in the business are required by the IRS to pay themselves a reasonable salary through payroll — distributions alone are not sufficient. "Reasonable compensation" is a facts-and-circumstances analysis, but the IRS looks at what a similarly qualified employee would earn in the market. We set up payroll for S-Corp owners, run the owner's salary through the payroll system with proper withholding, and ensure the payroll and distribution split is documented and defensible. This is one of the most frequently audited areas for small S-Corps.

PTO Tracking and Accruals

New York City's Earned Safe and Sick Time Act requires employers with 5 or more employees to provide up to 56 hours of paid safe and sick leave per year. For businesses with fewer than 5 employees, 40 hours of unpaid leave is required. We can help configure PTO and sick leave tracking in your payroll system to ensure accruals are accurate and leave balances are maintained correctly. Under New York State law, accrued unused vacation must be paid out at termination if the employer's policy does not state otherwise in writing.

Frequently Asked Questions