Payroll It Forward

This post is the eighth of ten in a series called “500 Words To Save The World.” Each post will use just 500 words to address a problem that has been bugging you or me. If you want to get in on the conversation, tell me the problem you’d like discussed in the comments section of this post, or email me directly at

Please keep in mind these are ideas, not plans; strategies not tactics.  I encourage your feedback and suggestions on how these ideas might become reality. You may start counting words… now!


Small business is the backbone of the US economy. More than 50% of the working population works in a small business.

The worst part of running a small business is the paperwork that comes with employees. Tax withholding and regular reporting is cumbersome, difficult and expensive.

It is for these reasons that many small businesses
don’t bother to play by the rules.

Years ago, my wife and I hired a nanny. Full compliance would mean withholding taxes and making quarterly reports and payments to both the IRS and NY State. I purchased a piece of software that did the math for me.

When it came time to make the first quarterly payment, they wouldn’t take my money. I had a temporary tax ID number, but to make an actual payment, I needed a permanent one. I called, but the person I spoke with could only tell me that I couldn’t make a payment with my ID; she was powerless to get me my permanent number.

I returned the withheld funds to the nanny and told her to report it all as “self-employed” income.

They made it too hard to follow the rules.

For years my uncle ran a successful contracting business. At one point he got into trouble with the IRS because he had been running an entirely cash-based operation and the taxes he had paid were, well, lacking.

I heard him complaining to my Dad about how “the damn government” was all up in his business. After a while my father said, “I am the damn government, because every dollar you don’t pay has to come from a guy like me.”

Here is the solution:

For businesses that have ten or fewer employees, the government should provide a free payroll service that works like this:

  • Large payroll processors (ADP, Paychex, etc.) would offer a free basic payroll service that would be paid for by the federal and state governments
  • The fee would be the same for any company willing to get into the game. They could differentiate themselves by the features they offer
  • Even if they had to do it at a loss, access to these new customers for other products and services would be worth millions, and when the free customer crossed the line to eleven employees, they would be able to charge market rates
  • Whatever the government had to pay for the service, would be more than offset by the increased revenue
  • In addition to capturing revenue that is currently being lost to non-compliance, the biggest net result would be a material improvement in fairness.

In general, people do want to follow the rules and make meaningful contributions to the society in which they live. However, when that society makes it easier to skirt the rules than to follow them, the losses go far beyond financial.

Make payroll for small business as welcoming as the old guy at Wal Mart with the stickers.

If we choose to “Payroll It Forward,” we will all be better for it.

Copyright © 2016 – Stephen S. Nazarian – All rights reserved.(Payroll It Forward)

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