DIY payroll versus a payroll service in 2026
DIY only saves money at one or two employees in one state. This page breaks down the time cost, IRS penalty math, and honest break-even point.
What payroll actually involves
| Task | DIY time | Service |
|---|---|---|
| Calculate gross wages and overtime | 20 to 40 min | Auto |
| Withholding (federal, FICA, state) | 20 to 30 min | Auto |
| Print or distribute pay stubs | 10 to 20 min | Auto |
| ACH file or check distribution | 30 to 60 min | Auto |
| Federal 941 deposit | 30 min monthly | Auto |
| State withholding deposit | 30 min monthly | Auto |
| Quarterly 941 filing | 1 to 2 hr quarterly | Auto |
| Annual 940 (FUTA) | 1 hr annually | Auto |
| W-2 generation and SSA filing | 1 to 3 hr annually | Included or $5 to $25/form |
| New hire reporting to state | 20 min per hire | Auto |
Break-even by team size
DIY can win for one fixed salary in one state. Break-even is close.
Service ($40 to $67/mo) usually beats DIY at three employees.
Service ($57 to $75/mo) clearly beats DIY at five.
DIY is unworkable. Use OnPay or Gusto Simple at $100/mo.
DIY is reckless. Hire a payroll service or a bookkeeper.
One mistake erases months of savings
The IRS failure-to-deposit penalty applies to federal employment tax (941) deposits. On a typical $3,000 monthly deposit for a small business, here is what each tier costs you.
| Lateness | Penalty | $3,000 deposit |
|---|---|---|
| 1 to 5 days late | 2% | $60 |
| 6 to 15 days late | 5% | $150 |
| 16+ days late | 10% | $300 |
| After IRS notice | 15% | $450 |
One 15 percent penalty ($450) wipes out roughly seven months of cheapest-service savings. Most paid providers absorb this risk and offer a tax-penalty guarantee.
Two-column checklist
- · You are the only employee or have one or two W-2s
- · You operate in one state with simple withholding
- · You pay monthly on a fixed salary (not hourly)
- · You have an accounting or bookkeeping background
- · You value your time below $15 per hour
- · You have three or more employees
- · You pay weekly or bi-weekly with variable hours
- · You operate in multiple states
- · You offer benefits, retirement, or garnishments
- · You have ever missed a tax deposit before