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Before You Buy Payroll Software in 2026: The Provider Files the Taxes. You Still Owe Them. Late Deposits Cost Up to 15%.

A payroll company can send your taxes. It can't take over your liability. The IRS says the employer stays on the hook, and one provider owner got 50 months over $20 million in unpaid taxes. Here's what each tier really costs and covers.

Published September 24, 2026 Updated October 20, 2026 21 min read High Risk
Disclosure: This guide may contain affiliate links. Learn more.
Quick Verdict

Buy the smallest payroll system that handles every worker type, state and pay rule you have today. Enroll in the IRS payment system yourself and read the fee sheet and the guarantee in writing. Walk away from any provider that won't show deposit receipts, asks to become your IRS address of record or won't state its cancellation terms.

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What your payroll software really costs per year

See the monthly fee, the steady yearly cost and the first-year cost once states, fast pay and year-end forms are in. Start with the vendor's written quote.

Recurring monthly cost Calculating...
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This estimates software fees only, not wages or payroll taxes. List prices were checked October 20, 2026. Confirm every line with the vendor in writing before you sign.

Late Deposits Cost 2% to 15%, and the Owner Is the Target

A payroll mistake isn't a software problem. It's a tax problem with your name on it.

Here's what the IRS says in Publication 15 for 2026. A late deposit costs:

How late Penalty
1 to 5 days 2%
6 to 15 days 5%
16 or more days 10%
Unpaid more than 10 days after the IRS's first notice 15%

A $5,000 deposit 20 days late carries a 10 percent penalty. That's $500 before interest. Our arithmetic.

Then the trust fund recovery penalty. The IRS says it is 100 percent of the unpaid trust fund tax. It can reach all persons the IRS determines were responsible, including anyone who signs checks for the business.

Hiring a provider outsources the work. It doesn't outsource the bill.

Year-end forms stack penalties too. For returns due in 2026 the IRS charges per form:

Filing Penalty per form
Up to 30 days late $60
31 days late to August 1 $130
After August 1 or never filed $340
Intentional disregard $680

The IRS lists the return and the employee copy as separate penalties. Ten W-2s filed after August 1 and also furnished late could reach $6,800. That's our estimate, and we didn't fetch the cap for small businesses.

Start With the Payroll Job, Not the Brand

Payroll software isn't one market. A family paying a nanny has a different legal job from a company paying 40 people in three states. A 4,000-person company needs controls and country coverage that would only slow the family down.

There are four useful buying levels. Pick the one that matches the work you actually have.

  1. Household payroll

    For nannies, senior caregivers, housekeepers and personal assistants. Look for household tax account setup, state notices, quarterly filings, W-2 forms and help with worker classification.

  2. Small-business payroll

    For a simple team in one or a few states. Look for automatic tax filing, unlimited payroll runs, direct deposit, contractor handling and support that answers before payday.

  3. Midsize payroll

    For several locations, more approval levels or a growing HR team. Look for time and attendance, benefits, job costing, permissions and audit history.

  4. Enterprise payroll

    For multiple companies, countries or unions, or complex security needs. Look for named implementation staff, tested integrations and a real recovery plan.

What Small-Business Payroll Costs Today

These are the vendors' own list prices on October 20, 2026.

Vendor and plan Monthly base Per person per month What to know
Gusto Simple $49 $6 One state. Unlimited payrolls, tax filings and payments.
Gusto Plus $80 $12 Multi-state, time tracking, next-day pay
Gusto Premium $180 $22 Named advisor, HR guidance, same-day and instant pay
OnPay Essentials $49 $6 Multi-state at no added cost. First month free.
QuickBooks Workforce Payroll Core $50 list $7 $25 for the first 3 months applies to the base only
Patriot Basic $17 $4 You file taxes yourself
Patriot Full Service $37 $5 Filings and deposits included. Extra states $12 each.
Rippling Quote only Starts at $8 Payroll price not published
ADP RUN Quote only For 1 to 49 employees
Paychex Flex Quote only Quote only

ADP's page shows a banner: 3 months free for small business payroll, ends 10/22. Paychex's Do Not Pay Until April 2027 promotion runs October 12 to October 31, 2026.

Here's the yearly list cost with one state, no add-ons and only W-2 employees. Our arithmetic:

People Gusto Simple Gusto Plus OnPay QuickBooks Core Patriot Full Service
5 $948 $1,680 $948 $1,020 $744
10 $1,308 $2,400 $1,308 $1,440 $1,044
25 $2,388 $4,560 $2,388 $2,700 $1,944

Patriot Full Service is the lowest sourced list price with filings included. It holds only if you don't need time tracking, extra states or fast pay.

Set the calculator above to your own team and your own quote. A monthly number without the fee sheet isn't a price.

The Fees Outside the Base Price

The base price is the front door. The add-ons are the rooms.

Gusto. Per its pricing page:

  • Next-day pay is $15 a month plus $3 per person on Simple, and included on Plus and Premium. Its help article says it's included on all three. That conflict isn't resolved, so ask for the rule in writing.
  • Same-day pay is $90 per payroll. Instant pay is $100.
  • Time and Attendance Plus is $6 per person a month.
  • Gusto Business Compliance is $85 a month per state, on an annual contract.
  • Remote I-9 is $20 a submission. E-Verify is $5 on top.
  • Priority Support is $30 a month plus $3 per person.

Gusto's help article adds that Same-day and Instant pay can't be switched on by the employer as needed.

OnPay. HR add-on is $15 plus $2 per worker. Time Tracking is $15 plus $4 per worker. W-2s, 1099s and year-end filings are included, and so is free migration.

Patriot. Extra state filings are $12 a state each month. Time and HR add-ons are $6 plus $2 per employee each. Patriot bills monthly in arrears.

QuickBooks. The 1099 e-file starts at $14.99 for three forms. Forms 4 through 20 are $3.99 each. We couldn't find the dollar amount of its state filing fee.

Here's the billing rule that surprises people. QuickBooks counts an active employee even if their earnings for the month were $0. Gusto bills active employees and contractors in months they're paid. Patriot bills per worker you pay during the month.

So a seasonal or inactive person costs money at some vendors and not others. Ask how a terminated worker still marked active gets billed.

ADP's RUN terms mention additional fees and 1.5 percent a month interest on past-due amounts. We couldn't find ADP, Paychex or Rippling setup, state, year-end or termination amounts.

Household Payroll Is Its Own Purchase

A nanny or caregiver may work for one family, but that doesn't make the worker a contractor.

The line is $3,000 in 2026. Pay one household employee $3,000 or more in cash wages and you owe Social Security and Medicare tax. That's 7.65 percent from you plus 7.65 percent from the employee, 15.3 percent combined.

Pay $1,000 or more in any quarter and federal unemployment tax applies. The effective rate is 0.6 percent on the first $7,000.

The forms:

  • W-2 and W-3 are due February 1, 2027
  • Schedule H goes with your personal 1040 by April 15, 2027

A nanny paid $30,000 costs you $2,295 in Social Security and Medicare plus $42 in federal unemployment. That's our estimate, and it leaves out state unemployment tax.

We didn't find a 2027 household threshold.

Here's what services charge:

Service Monthly fee What's in or out
Care.com HomePay Essentials $59 Federal and state registration, quarterly taxes, year-end forms. No tax-agency notice management.
Care.com HomePay Plus $75, first month free Adds dedicated account management, audit support and notices managed for you
Poppins Payroll $49 for one employee, $10 for each extra First calendar month free. Closing mid-quarter costs $49, and year-end documents $110 if you quit before December.
SurePayroll (Paychex) $39 limited-time Schedule H, federal and state taxes, 2-day direct deposit

HomePay publishes both prices. Per its page, tax-agency notice management is Plus only.

One caution on Poppins.

Its notice letter, dated September 29, 2026, says an unauthorized party used a flaw in a software vendor on September 3 to reach a Poppins system. It offered 24 months of credit monitoring.

A tracker reports 246,937 people affected. That count is secondary and doesn't match another report.

Self-filing is legal. A specialist service costs $39 to $75 a month in what we sourced.

Don't put a household employee into your company payroll just because you have an account. Check your state's rules.

When the Provider Takes the Money and Doesn't Pay the Tax

This isn't theory. It's in the court record.

Elite Payroll. In a Florida case from 2014 to 2022, IRS Criminal Investigation says more than $20 million of withheld taxes weren't paid over. One client owed about $219,000 for a quarter in 2021 and paid the provider. The provider told the IRS the client owed about $32,000. The owner kept about $190,000.

Matthew Brown was sentenced to 50 months on April 24, 2025. He was ordered to pay $22,401,585 in restitution and a $200,000 fine.

MyPayrollHR. The Justice Department said the scheme collapsed in late August and early September 2019. It left payroll companies unable to process payroll and tax payments for hundreds of small business customers. Michael Mann was sentenced on August 4, 2021 to 144 months and $101,038,793.31 in restitution.

The IRS's advice is plain:

  • Enroll in the Electronic Federal Tax Payment System yourself. It's free.
  • Check deposits against what you paid. Payment history stays online for 16 months.
  • Don't change your IRS address of record to the provider's
  • Treat a missed or late payment as a red flag

The IRS also says the employer is liable for all taxes, penalties and interest due. And it may be personally liable.

Keep the tax notices coming to you. Save filed returns, payroll registers and proof of payment outside the vendor's account.

What the Guarantees Actually Cover

A payroll guarantee reimburses certain things under certain conditions. It doesn't remove your liability.

Here's what each vendor's terms say:

Vendor What it covers Limits we found
Gusto Remitting the tax and paying penalties from its own failure, per its Payroll Service Terms updated August 18, 2025 You must use prompt and reasonable efforts to limit the damage. Wrong inputs are excluded. Interest isn't listed in that clause.
QuickBooks Payroll tax penalties and interest if your information is correct and on time Tax penalty protection is for Workforce Elite only, requires the notice within 15 days and covers up to $25,000 a year
Care.com HomePay Penalties from its fault if it can't get them waived Excludes any other liability or the underlying tax. It needs complete and accurate information by quarter's end.
ADP RUN Penalties and interest caused by its own filing errors For most other claims its liability is capped at the average charge for one payroll
Patriot Marketing says it will take care of penalties and interest if it errs We didn't fetch the full terms
OnPay Marketing says it takes care of the tax agency if it makes a mistake We couldn't find the terms

Gusto's terms also say a payment can be rejected or reversed if your bank account lacks funds. Gusto isn't liable for the consequences, including unremitted taxes. For ACH, the funds must be available by the close of business the day before the debit.

If you stop using Gusto, terminate inside the account. Failing to may let it keep processing and filing on your behalf, and those filings may be incomplete or duplicate.

A guarantee reimburses. It doesn't absolve.

Get the guarantee in a document. Ask whether it covers penalties only or interest too, any cap and the notice deadline.

What Changes as a Company Grows

A small company buys correct pay and tax filing. A midsize company starts buying control. An enterprise buys control across legal entities, countries and systems.

Need Small business Midsize Enterprise
Tax filing Automatic federal, state and local filing Multi-state review and a notice workflow Country and legal-entity governance
Time data Simple hours or an outside app Scheduling, overtime and job costing Many systems, unions and complex earnings
Approvals Owner or bookkeeper Managers plus a payroll team Role-based chains with audit history
Reporting Payroll register and tax totals Department and location labor cost Consolidated global controls
Setup Guided import Planned migration and parallel run Formal implementation with testing
Support General queue Payroll specialist or service team Named service model and escalation terms

ADP positions its RUN product for 1 to 49 employees. We couldn't confirm its larger product tiers because its pages blocked us. Workday says its payroll network connects more than 180 countries through partners, but partner coverage isn't the same as native payroll.

Ask who actually calculates, files, funds and supports payroll in every country you use.

A few 2026 rules also shifted. The reporting threshold for 1099-NEC rose from $600 to $2,000 for payments made after 2025. The Social Security wage base is $184,500 in 2026 and $192,300 in 2027, per the Social Security Administration. Check your software's defaults.

Contracts, Promotions and the Clawback

A promotion usually discounts the base. The per-person fee stays full price.

QuickBooks says its free trial and 50 percent discount don't apply to per-employee fees, per-contractor fees or state filing fees. For 10 people the discounted base saves $75. The $70 a month per-employee fee is full price.

Paychex's free-months promotion requires a one-year agreement. On early termination Paychex says it will be entitled to recover the value of any free months provided.

ADP RUN's terms say you're agreeing to automatic renewals. Either party may end the agreement on at least 30 days' written notice. Unpaid amounts accrue 1.5 percent interest a month.

Poppins auto-renews monthly until canceled. It issues no refunds for partial months.

HomePay has a six-month happiness guarantee. If you call within six months of activation it will reimburse all HomePay fees you've paid, once. It excludes some fees.

We couldn't find cancellation or refund terms for OnPay, QuickBooks or Patriot beyond their free trials.

For five-year costs, ask for a written table with:

  • Implementation and required partners
  • Annual increases
  • Minimum worker counts
  • Storage and test environments
  • Exit assistance

For the same lock-in pattern in other software, see the business software guide. For per-seat billing, see the ChatGPT Business guide.

Run a Parallel Payroll Before Cutover

A demo proves the screen works. A parallel payroll proves your payroll works.

Load real workers into a test environment and calculate the same period in both systems. Compare these line by line:

  • Gross pay and taxable wages
  • Every tax
  • Deductions, benefits and garnishments
  • Paid time off
  • Accounting entries and net pay

Test an ordinary payroll and an ugly one. The ugly one should include:

  • A bonus and a terminated employee
  • A new state and a manual check
  • A correction
  • A worker who crosses an overtime line

The first payday is slower than you think.

Gusto says most new employers start on 4-day pay. Moving to 2-day pay comes after a 15-day wait and one successful debit.

The deadline is 4 p.m. Pacific, four business days before payday. A new hire's first check can be late if you start the week before.

Never cancel the old service until you've exported:

  • Employee history
  • Tax filings
  • Payroll registers
  • Year-end documents
  • Bank reports
  • Configuration records

Use formats you can open without the vendor.

The questions that expose a weak demo:

  • Show me a tax notice from intake through resolution
  • Show me how a corrected payroll changes filings and accounting entries
  • Which taxes do you file directly, and which need a partner or manual work?
  • What happens if our direct deposit fails on payday?
  • Can we export every record without a custom project?
  • Which features in this demo cost extra?

A confident salesperson answers with the product. A weak one answers with a promise.

Who Should Buy Now, Wait, or Walk Away

Six rules. Each one comes from the cases above.

  1. Buy now if you're one state with up to about 25 W-2 employees and simple pay

    Use a full-service plan with filings included. Enroll in the IRS payment system first and get the fee sheet in writing.

  2. Buy now as a household employer once you pay $3,000 or more in 2026

    Pick the tier by whether you want notices handled. Read the closing-fee rules.

  3. Wait if you're switching mid-quarter for a promotion that ends this month

    ADP's ends October 22 and Paychex's ends October 31, and Paychex claws back free months.

  4. Wait if you need multi-state payroll, time tracking or fast pay

    Price each add-on in writing. The list prices above are base plans only.

  5. Walk away from a provider that won't let you enroll in EFTPS

    Or one that asks to be your IRS address of record, or collects taxes without showing deposit receipts.

  6. Walk away from contracts that stack auto-renewal, a clawback and a liability cap you haven't read

    Unless the written total is acceptable. See the business software guide.

How We Checked It

We read vendor pricing and terms pages, IRS publications, the Social Security Administration, Justice Department and IRS Criminal Investigation releases and a state attorney general's breach record. We checked them on October 20, 2026. Several vendor pages blocked plain requests and were read in a browser instead.

Nothing here is tax, legal or financial advice. Ask your accountant or state agency about your own situation.

The pages we used:

What we couldn't confirm:

  • ADP, Paychex and Rippling payroll prices and their setup, state, year-end and termination fees
  • Cancellation and refund terms for OnPay, QuickBooks and Patriot
  • ADP's larger product tiers
  • State registration steps beyond the federal level
  • A 2027 household employee threshold
  • The true count of people affected by the Poppins breach
  • Whether the 60 hours a year a family spends on nanny payroll, quoted by two vendors, comes from the IRS

This guide is part of our series on what people research before they buy.

Frequently Asked Questions

Does a payroll company take over my tax responsibility?
No. The IRS says an employer remains responsible if the third party fails to perform any required action, and may be personally liable for withheld taxes. Enroll in the IRS payment system yourself and check that deposits match what you paid.
How much does small-business payroll cost in 2026?
Published list prices on October 20, 2026: Gusto Simple is $49 plus $6 per person. OnPay is $49 plus $6 per worker. QuickBooks Core is $50 plus $7 per employee. Patriot Full Service is $37 plus $5 per worker paid. Add-ons for extra states, time tracking and fast pay cost extra. ADP, Paychex and Rippling publish no payroll prices.
Do I have to use a service to pay a nanny?
No. But if you pay a household employee $3,000 or more in cash wages in 2026 you must withhold and pay Social Security and Medicare, give a W-2 by February 1, 2027 and file Schedule H by April 15, 2027. Pay $1,000 or more in any quarter and federal unemployment tax applies. Check your state's unemployment rules separately.
What do payroll guarantees actually cover?
Usually the penalties, and sometimes the interest, that come from the vendor's own error, if your information was correct and on time. They don't cover the tax itself. QuickBooks' extra protection is limited to its Elite tier and $25,000 a year. Gusto asks you to limit the damage. HomePay excludes the underlying tax obligation.
How fast is the first payday with a new provider?
At Gusto, new employers usually start on 4-day direct deposit and move to 2-day after 15 days and one successful debit. The cutoff is 4 p.m. Pacific. We didn't source other vendors' speeds.
Should I switch providers now?
Check promotions first. ADP's offer ends October 22 and Paychex's ends October 31, and Paychex requires a one-year agreement with a clawback of free months. A quarter start or a new year is a common switch point, though that's a rule of thumb with no source. Keep exports of your old provider's records before you cancel.