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How to Switch Payroll Providers

As a company transitions through various stages of business development, the dynamics of the company goes through a metamorphosis as well. To continue to operate efficiently and effectively companies often add or change services to suit their needs. Sometimes when you grow, what used to work well before is now not cutting the cheese. New processes, new systems, and software need to be implemented over time to meet your business’s demand. Yes, sometimes even your payroll service & HR solutions need to be updated as well.

Remember the old saying, “If you buy a $1 cheeseburger, you are going to have to eat it.” That not an old saying, I just made it up. All I am saying is, be cautious and diligent when making a decision that has an impact on your business’s operations. What you consume may look great, but it may not taste so well.  Make sure you do your due diligence before making changes. The company you choose should be able to provide you features and services that meet your company where you are while also being flexible to grow with you over time.

Finding The Best Payroll Service 

Compare payroll services according to the functionality of the software, and the rating of the company’s customer service from google reviews, Yelp and then also social media discussion boards. Dig deep and find out what people say about the companies you’re considering on discussion boards. It will make you think twice about your motivation for selecting a payroll company based on their amiable price proposal. Here are a couple of articles that can help you determine what you need to look for in a local payroll service provider:

See the article – Top Reasons why people leave their payroll provider

See the Article – Reasons why your payroll provider costs you money

A Checklist For Changing Payroll Providers

When you determine as to which payroll provider you will use. Here is a list of documents you’ll need to provide to your new payroll company so they can start handling your tax liabilities.

1. Verification of Federal Tax ID Number:

  • Letter from IRS with Federal ID number displayed
  • Most recent 940 or 941 Form
  • Form SS-4 with Federal ID number indicated
  • Business Entity Type
  • Title of Owner
  • State Unemployment #ID and current-year tax rate notice

*If you started a new business will need to apply for a State Unemployment Insurance (Hyperlink) ID in your respective state.

2. Voided check for payroll account (Bank Verification Letter for New Businesses)

3. For EACH employee paid in the current year (Current and Past Employees)

– Name                                                                   – Pay rate

– Address                                                               – Department

– Social Security number                                    – Deductions (health insurance, 401k, etc.)

– Filing Status                                                        – Court ordered Child support

AND YTD and QTD total in the following categories:

– Gross Wages                                                      – Federal Withholding

– Social Security Withholding                             – Deductions

– Medicate Withholding                                      – Net pay

4. Copies of Current year quarterly 941s, state unemployment insurance quarterly returns, and other State withholding returns (for existing businesses)

5. Current quarter payroll tax deposits/liabilities by check date. (Sometimes called a liabilities report)

Before you Notify Your Payroll Provider You Are Leaving

Before terminating your online access to your current payroll platform, reach out to their customer service department and request a copy of all your quarterly and annual tax filing reports for record-keeping purposes. Also, ask for all your payroll registry reports for the current and previous year(s) just in case.

Once you have taken your business elsewhere, companies have been known to retaliate or hold your data hostage and justify not helping you because no longer provides them any revenue.

How To Quit Your Current Payroll Service

Draft a letter to your old payroll processing company letting them know you won’t be using their services. But first, make sure you have gotten payroll processed with the new company before sending a letter. Feel free to use the below sample letter to help you facilitate a smooth transition.


Dear Payroll Provider:

This serves as notification that effective immediately we have discontinued using your payroll and tax filing service.

Effective immediately, please DO the following:

  1. Deposit immediately any FICA, Federal Withholding, State Withholding, Local Withholding, and State Disability Withholding Tax, if applicable, that you are currently holding undeposited for our account.
  • Refund to us any State Unemployment Insurance (SUI) and Federal Unemployment Insurance (FUTA) tax that you are currently holding undeposited for our account.

Please DO NOT do the following:

  • Submit for our account any further quarterly payroll returns to any tax agency, state or federal.
  • Submit for our account any further annual payroll returns to any tax agency, state or federal.

After making the final deposits for our account mentioned above, we do hereby cancel any power of attorney you hold to represent us in any regard to any bank or government agency.

Thank you for your timely attention to these matters. Please reply and confirm the receipt of our request.



Follow up after transitioning to a new payroll company.

If you do not use a termination letter or notify your previous payroll company that you are leaving their service, you’ll need to follow up. Just because you have not been running payroll with your prior company does not mean they will not continue to process taxes on your behalf. Let them know not to file your upcoming Quarterly 941 form because they may assume you are still a client.

Additionally, the payroll company is likely to bill you for the tax filing. Contact that company before quarter-end just as a precaution so you can avoid multiple 941 forms being filed with the IRS. If you have -these issues you’ll need to submit a 941-X Adjusted Employer’s Quarterly Federal Tax Return to correct the discrepancy.

Lastly, make sure the company you move on from provides you a written acknowledges of the date you terminate payroll services so they cannot come after you regarding a last-minute surprise bill. This is important because being on a payroll processor roster means they could charge you fees for having access to their software.


There are many good payroll companies in Texas and many more across the United States. When deciding to outsource payroll or transition to a new company, find one that is compatible with the goals your organization is wanting to accomplish. While managing payroll is an important function of every business, it’s not something you should think about regularly. Rather, it’s a system you should set in place, forget about and move onto other pressing matters of business.

If you need some advice or have questions about what system is best for your company, feel free to reach out to us for help.

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