How to Choose the Right Managed Payroll Provider
The right managed payroll provider can show you in writing which IRS arrangement it works under, whose employer identification number (EIN) files your returns, who keeps control of your people decisions, and how scope and price are set. Because the IRS says you generally stay responsible for outsourced payroll taxes, verify the provider’s work after you sign.
AsureWorks, Asure’s managed service, is one managed option to consider.
What should you test before you choose a provider?
Criterion
What it tests
What a clear written answer looks like
Accountability for deposits and filings
Which IRS arrangement the provider works under and whose EIN files your returns
The arrangement named in the contract, the authorization form it relies on, and the EIN used for filing
Control of people decisions
Whether you decide hiring, pay, and benefits, and whether the arrangement is co-employment
A statement of who the employer is and who sets compensation and policy
Growth
What happens to scope and price as you add employees, states, or services
A description of what triggers a change and who handles new state registrations
Compliance support in practice
Which filings and reports the provider handles and which duties stay with you
A list of the specific returns, deposits, and reports covered, with exclusions named
Scope and pricing
What the base fee covers and what it is based on
A fee schedule and scope document delivered before you sign
Who is accountable for your tax deposits and filings?
You generally stay responsible for payroll tax duties you outsource (IRS Publication 15, 2026, section 16). A payroll service provider (PSP) “isn’t liable as either an employer or an agent” for your employment taxes, per the same publication. The employer “is ultimately responsible for the deposit and payment of federal tax liabilities,” may face penalties and interest if the third party fails to pay, and may be held personally liable for certain unpaid federal taxes (IRS, “Outsourcing payroll duties”). Under Internal Revenue Manual 5.1.24, liability for employment taxes “cannot be altered by a private agreement or contract.”
Arrangements in which the employer stays liable to the IRS differ by whose EIN files the returns (Third party arrangements; Third party arrangement chart).
Arrangement
Whose EIN files the returns
Authorization
Who the IRS says is liable
PSP
Your EIN
You sign the returns the PSP prepares
You remain liable
Reporting agent
Your EIN, on separate returns the agent signs and generally e-files
Form 8655
You remain liable
Section 3504 agent
The agent’s own EIN, on aggregate returns (you still file Form 940 under your own EIN)
Form 2678
You and the agent are both liable
Failure-to-deposit penalty tiers, as of October 2026. The penalty is 2% of the unpaid deposit when it is one to five calendar days late, 5% when six to 15 days late, and 10% when more than 15 days late. It is 15% when the deposit is still unpaid more than 10 calendar days after the first IRS notice or on the day you receive a notice demanding immediate payment. The tiers replace one another, and the IRS may remove or reduce penalties for reasonable cause (IRS, “Failure to Deposit Penalty”).
Will you keep control of your people decisions?
Under the IRS common-law test, anyone who performs services for you is your employee if you can control what will be done and how it will be done, and the substance of the relationship governs whatever label is used (IRS, “Employee (common-law employee)”). That makes control over people decisions the question to put to a provider.
A professional employer organization (PEO) operates through co-employment. The IRS describes PEOs as handling “various payroll administration and tax reporting responsibilities” for clients (IRS, “Certified professional employer organization”). Managed payroll versus a PEO comes down to two questions. Is this a co-employment arrangement? Under whose EIN are returns filed?
AsureWorks is a PEO alternative with no co-employment, so you remain the employer, keep control of workforce decisions, and keep your own benefits plans, broker, and retirement programs. What transfers is execution. Statutory liability stays with you as the employer.
Can the provider grow with your business?
Ask what happens to scope and price when you add employees, a state, or services such as benefits administration, time and attendance, or HR support, and who handles new state registrations.
Several rules change as you grow. The Affordable Care Act large employer test counts at least 50 full-time employees, including full-time equivalents, on average in the prior year (IRS, “Determining if an employer is an applicable large employer”). Most employers pay both federal and state unemployment tax, and registration steps vary by state (IRS Publication 15, section 14; U.S. Department of Labor, state unemployment tax contacts). New-hire reports go to a designated state agency within 20 days of hire, and some states require them sooner (HHS Administration for Children and Families (ACF), “New Hire Reporting”).
AsureCentral serves a primary range of 25 to 500 employees, with reach to 1,000-plus for multi-state, multi-location, or hourly-workforce complexity. AsureWorks runs on the AsureCentral platform with Asure specialists doing the work, serves a primary range of 25 to 250 employees, and is also used by faster-growing smaller teams and by larger employers with fragmented payroll and HR. Moving from running payroll yourself on AsureCentral to having Asure specialists do the work changes who does the work, not the platform.
What does compliance support look like in practice?
Separate what you ask a provider to handle from what stays your legal responsibility.
* Ask which federal deposits and returns the provider handles. A Form 941 filer deposits monthly if total taxes in the four-quarter lookback period were $50,000 or less, and semiweekly if more than $50,000 (IRS Publication 15, section 11).
* Confirm who prepares, files, and delivers Forms W-2 and W-3, and whether that work is in the base fee. You remain responsible for furnishing Forms W-2 and filing Forms W-2 and W-3 even when a provider prepares them. The 2026 forms are due February 1, 2027, and e-filing is required at 10 or more information returns in total (IRS, W-2 and W-3 instructions).
* Ask how Form 1099-NEC is handled for non-employee contractors, which has a $2,000 reporting threshold for 2026 payments as of October 2026 (IRS, instructions for Forms 1099-MISC and 1099-NEC).
* Ask who submits new-hire reports in each state where you hire. Reports go to a designated state agency, and the IRS does not collect them (ACF, “New Hire Reporting”).
* Ask how the provider handles valid withholding orders. Employers are legally required to honor valid withholding orders such as child support (ACF, “Income Withholding”).
* Request a process for returning your payroll records. Employment tax records must be kept at least four years (IRS Publication 15).
Asure HR Compliance, an add-on to AsureCentral or AsureWorks, comes in three tiers (HR Support, Strategic HR, and Total HR). Phone and email access to certified HR professionals is in every tier, and proactive audits and reviews and manager training programs are in Strategic HR and Total HR only.
How are scope and pricing quoted?
Pricing varies with scope, headcount, and the states you operate in.
* Get the base fee, a plain description of what it covers, and a fee schedule and scope document before you sign.
* Ask what the fee is based on. PEOs are “typically paid a fee based on payroll costs” (IRS, “Certified professional employer organization”), so confirm the basis for any provider you consider.
How do you verify the provider after you sign?
* Register for your own Electronic Federal Tax Payment System (EFTPS) PIN and periodically verify payments. EFTPS shows 16 months of payment history (IRS, “Outsourcing payroll duties”).
* Open an IRS Business Tax Account, which lets eligible businesses view balances and payment history and read IRS notices and letters (IRS, “Business Tax Account”).
* Check deposits on a schedule and treat the first missed payment as a red flag. The IRS says that “a red flag should go up the first time a service provider misses a payment.”
* Keep your own address as the IRS address of record (IRS, “Outsourcing payroll duties”).
* Get the quarterly written statement a reporting agent must give clients saying the employer is responsible for filing and paying on time (IRS Tax Tip 2023-65; Internal Revenue Manual 5.1.24).
* File Form 14157 if you suspect improper or fraudulent payroll service provider activity involving deposits or returns, and contact the IRS promptly about any bill or notice a provider problem causes (IRS, “Outsourcing payroll duties”).
* Ask when you will see the quarter’s deposit confirmations. As of October 2026, the Q3 2026 Form 941 is due November 2, 2026, or November 10, 2026 if all deposits were made on time (IRS, Instructions for Form 941).
What should you ask every provider before you sign?
Send these questions to every provider and ask for written answers.
1. Which IRS arrangement does it work under, and which authorization form does it rely on?
2. Whose EIN files your employment tax returns and makes your deposits?
3. Is the arrangement co-employment, and what role do you hold as the employer?
4. Who controls hiring and pay, and do you keep your own benefits plans and broker?
5. What changes when you add a state, cross a headcount threshold, or add services?
6. What base fee and fee schedule apply?
7. How will you see deposit confirmations in your own IRS accounts?
8. Who is your contact after setup, and what is the escalation path when something is missed?
What should you do before you request quotes?
Put the same questions to every provider on your shortlist. To see how AsureWorks and AsureCentral on one platform work together, talk to an Asure expert about your setup and ask for a custom quote.
Frequently Asked Questions
What is the difference between managed payroll and a PEO?
PEOs use co-employment, so the deciding questions are who acts as the employer and whose EIN files the returns. A payroll service provider or reporting agent files under your EIN, and you remain liable. In a PEO arrangement, the PEO asserts that it is the employer, or co-employer, and pays wages under a service agreement (26 CFR 31.3504-2).
How can you tell whether a provider can scale with your business?
Ask what triggers a change in scope or price and who owns each new task, such as a state registration. A clear answer names the trigger and the person responsible. Get the same detail on rules that shift as you grow, such as large employer status under the Affordable Care Act and state unemployment tax registration.
What changes if you switch managed payroll providers mid-year?
A new provider needs your year-to-date wages and taxes. Form W-2 reports wages paid in the calendar year, and employee social security withholding stops at the 2026 wage base of $184,500, as of October 2026 (IRS, W-2 and W-3 instructions; IRS Publication 15). Ask how the provider brings that data in.
How does AsureWorks differ from a PEO?
AsureWorks is a managed service and a PEO alternative with no co-employment, and Asure is not a co-employment PEO. You remain the employer, keep control of workforce decisions, stay responsible for deposits and returns, and can choose your own benefits plans, brokers, and programs.
What does AsureWorks cost?
AsureCentral and AsureWorks pricing is a custom quote based on employee count, setup (self-service, hybrid, or fully managed), the plan chosen, and the modules added, for example Asure HR Compliance, Asure Time & Attendance, Asure Recruiting, or 401(k) Plans. Payroll and HR connect on one platform with one login. To see a figure for your business, request a custom quote from Asure.
