Does Tax Money Have to be Deducted by Payroll Services?

Does tax money have to be deducted by my Payroll Service or can I deduct it myself and keep in my account until it is due? I'm wondering if the payroll company deducts tax money from my payroll and they put it in bank then they get interest on it and I don't. Is that correct or am I totally incorrect?

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You May Pay Taxes Yourself
by: Best Business Payroll

You are correct that payroll companies routinely subtract tax money from your account and hold it in their account until the money is due when you opt for them to do your tax filing for you. This is common practice, and is known in the industry as the "float". It is one of the ways payroll service providers make money--by earning interest on this money until it is due.

That being said, Tax Filing is a separate service from the payroll processing itself that you may decline. The standard reporting you get with your payroll calculations will do the math on the taxes, letting you know exactly what you owe so that you can pay it yourself. If you opt for this, you will indeed be able to keep your money in your own accounts earning interest for your company until the taxes are due.


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