Two distinct camps in the CPA community are feuding over payroll services, as adamant in their positions and loyalties as Shakespeare's rival Montagues and Capulets.And while the subject of payroll may appear inherently less passionate than Romeo and Juliet, the warring factions each express their position with equal fervor.

One side, the "in-housers," believes that accountants can't really know their clients unless the CPA firm performs the clients' payroll. Meanwhile, the other camp, "the outsourcers," argues that there are more important and lucrative accounting services to offer.

But the two warring camps may be able to come to peace with one another, as a middle option is gaining more recognition and focus.

Many payroll providers and service bureaus are now offering a full spectrum of options for CPAs, with an assisted payroll choice peeking its head out as a focus for many of the providers and helping CPAs turn a profit without the associate payroll headaches.

In 2001, only 20 percent of CPAs surveyed by PayCycle, a payroll service provider in Palo Alto, Calif., did their clients' payroll. That number jumped up to 75 percent this year, when a similar study was performed by PayCycle in conjunction with Genesis Research Associates, a Descanso, Calif.-based marketing research consultancy.

As more CPAs provide payroll services for their clients, the choice between outsourcing all, part or none of the services comes into question.

Proponents of performing payroll in-house, such as Ray Busch, CPA and owner of the CPA firm Raymond Busch Ltd. CPAs, in Tinley, Ill., strongly believe that no dedicated CPA should outsource their clients' payroll.

"All accountants should do their clients' payroll," he said. "It's a good source of revenue and really helps with tax planning for clients. In many instances you can print worker compensation and union reports on demand for auditors when they need them. If you use ADP or Paychex, you have to hand them a book three feet thick to plow through."

Busch said that he uses Creative Solutions' Payroll CS in-house application to do his clients' payrolls. "I would never outsource. I don't want my client list going off site. I won't share - who owns my client if I share, me or ADP?"

The in-house camp follows Busch's belief that doing a client's payroll brings the CPA closer to the client's tax needs, creates a steady source of revenue, and gives the firm a higher resell value.

"Some like to do it themselves, because if you have a payroll practice, you're like gold," said Creative Solutions' manager of payroll services, Lee Hedges. "Unlike a regular accounting firm, if you want to retire or sell the firm, you can sell it to any payroll service out there."

A plague o' your firm?

But keeping up with frequently changing payroll guidelines leads to nothing but headaches, say the outsourcers.

"The single most frustrating thing is keeping up with the changes in laws and keeping clients in compliance with those laws," said Albert P. Lanzillotti II, CPA and owner of an eponymous CPA firm in Saugus, Mass. "When I get a new client, I always refer them out to a payroll service. I do whatever I have to do to get them current, but once they are current, I send them directly to Paychex."

Service bureaus repeat the same benefit for CPAs - shouldering the responsibility for tax processing and filing - and add that entering in data for payroll can be time-consuming and not very lucrative, because CPAs cannot bill those hours spent doing unskilled labor like data entry at a high rate.

Yet small businesses often turn to their accountants for payroll advice and assistance.

QuickBooks recently did a study of their client base of 2 million small business users and found that 50 percent of them involve their accountants directly in some part of their payroll service, and another 10 percent, or 200,000, outsource entirely to their CPA firm, said Terry Hicks, director of QuickBooks financial software.

In response to the high demand, large payroll providers such as ADP, QuickBooks, Sage Software, PayCycle and Creative Solutions have created assisted payroll options.

These options shoulder the responsibility of tax filing for the payroll laws and give control to the accountant over their client's payroll processing, with the revenue benefits associated with collecting payroll fees.

"It's a nice mixture. Some clients like to do it themselves, so we set it up for them and give them the ability to log onto the site and punch in their hours, and I do all the behind-the-scenes work," said Ed Forker, managing partner at Marlton, N.J.-based CPA firm Forker & Associates LLC.

"It's only 20 percent of our practice's revenue, but it's been growing - it's a real growth vehicle for us. PayCycle takes the burden off of having to manually put together all the quarter-end reports, and streamlines it so you just review and push the button to electronically file for all customers."

By any other name

PayCycle is one of the only assisted services that allows CPAs to brand all payroll materials - checks, reports and Web portals - with the firm's logo or signature, but many like ADP, QuickBooks and Sage are looking into such branding for the future.

QuickBooks has offered assisted payroll since 1998, said Hicks; however, the launch of the service was "without much fanfare."

This year is the first year that QuickBooks Payroll is focusing on its QuickBooks Assisted Payroll service. Many other payroll providers have noticed the same trend and are suited up with their own assisted payroll options.

"Outsourcing means different things to different people; it depends on how much control they want. We decided we wanted to make more selections for different levels of control - three-tiered selections," said Linda Sussman, director of product marketing and accounting services for ADP, a payroll processing company headquartered in Roseland, N.J. "Now our solutions match all the demands from accountants."

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