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HR outsourcers know full well how small businesses are often at a disadvantage when it comes to managing payroll taxes for the simple fact that most don’t have people on hand who really understand them.
After all, taxes are complex—and they are always changing.
One misstep for your clients could mean an IRS penalty that will eat into their already tight budget. And tax-related issues add up quickly. Take New York City for instance. The interest rate alone is set at a robust 11% for tax underpayments for the third quarter of 2025. And interest compounds daily! On the federal level, penalties can range from hundreds to thousands of dollars. In fiscal 2024 alone, the IRS collected almost $21 billion in business income penalties alone.
Payroll tax compliance is no small feat. According to a National Small Business Association survey from earlier this year, small businesses (i.e., your clients) spend an average of 20 hours per year working on federal taxes with 11% spending more than 10 hours per month.
Adding to the challenge for your clients is the One Big Beautiful Bill Act (OBBBA), which was recently signed into law. This legislation could streamline some federal tax processes but may introduce new compliance requirements for your clients. However, there are also many proposed tax cuts directed at your clients, which, if leveraged properly, could be beneficial. The OBBBA’s potential impact underscores the need for adaptable payroll solutions for your clients that can keep pace, and even take advantage of, regulatory shifts.
Regardless of the OBBBA, regulations and tax codes are continually changing. Imagine putting dozens of hours into understanding the tax code only to have it change for the third time this year. This throws a moving target into an already complex and frustrating process. By gaining access to a tool that can update regulations in real time, HR outsourcers can provide peace of mind knowing they no longer need to manually track regulatory changes or worry about problematic outdated information.
Repeat Is Not an Easy Feat
Any task that is time-consuming, repetitive and susceptible to human error is begging to be automated—and payroll taxes fit the bill perfectly. Small to medium-sized businesses (SMBs) spend five to 15 hours on payroll tax compliance each pay cycle. Large businesses can spend 35 hours, likely more, per pay cycle. Outsourcing this process will save your clients both money and time. Manually filing is error-prone, incurring fines and costs companies time through reconciling. Using an automated payroll tax system, HROs can both save time and dramatically reduce their risk of error.
Manually filing taxes might give your clients complete control, but it is an inefficient, time-consuming and risky proposition. On the other end, an automated tax payroll system provides speedy filing with high accuracy. An integrated solution give you—and them—the ability to manage payroll taxes without the headaches through automation.
Don’t Pass the Remote
Today’s business landscape is more complicated than ever when it comes to payroll. That’s especially true for businesses juggling state taxes for their remote team members who are spread across multiple states.
The rise of remote work has only made things trickier. With some 30% of employees now working fully remote and 41% in hybrid roles (up from just 17% pre-2020), businesses must navigate multiple jurisdictions, each with their own tax codes and unique filing requirements.
As an HR outsourcer, you need integrated tools to help your clients navigate this challenging terrain.
We understand that every HR outsourcer is different. A business with five employees might want a fully automated tax management solution to save time, while a midsized firm with an HR team might prefer to handle some tasks in-house and outsource others. The key is flexibility—choosing tools and services that scale with your needs and let you focus on what you do best.
By understanding the challenges and exploring smarter solutions, you can save time, reduce risk and keep your clients—and your business—on track.
Why not make compliance less taxing?
Curious about simplifying your payroll process through automation? Check out PrismHR Tax to learn how you can make taxes less taxing with full-service and self-service options—so you can get back to doing all those things you enjoy doing for your clients.
