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    PAYROLL

    Payroll Services

    Pay Your People Right. Every Time.

    Payroll is not just writing checks — it is federal and state tax deposits, quarterly filings, W-2s and compliance obligations that never stop.

    One missed deadline or miscalculated withholding can trigger IRS penalties that cost far more than the payroll service itself.

    We handle payroll for Washington businesses so you never have to think about it.

    QuickBooks Payroll · Gusto · Virtual across Washington State · Bothell Office

    Call +1 (425) 699-6990

    WHO IT'S FOR

    Who We Handle Payroll For

    From a single S-Corp owner-employee to a small business with a full team — we handle it all.

    S-Corp Owner Salary Payroll

    If you have S-Corp status you are required to pay yourself a reasonable salary through payroll. We set it up, document the amount, and handle all filings.

    Small Business With Employees

    We process payroll, handle all tax deposits, and keep you compliant with federal and Washington State requirements.

    WHAT'S INCLUDED

    Full Service Payroll

    Every payroll engagement is scoped at a free consultation.

    Payroll Processing

    • Employee payroll processing
    • Direct deposit setup
    • Owner salary processing
    • Contractor payment tracking
    • Pay stub generation
    • Garnishment processing
    • PTO and benefit deductions
    • Multi-state payroll

    Tax & Compliance

    • Federal tax deposits
    • Washington State L&I
    • Washington Paid Family Leave
    • WA Cares Fund
    • Form 941 quarterly filing
    • Form 940 annual FUTA filing
    • W-2 preparation and filing
    • 1099-NEC contractor filing

    SOFTWARE

    We Work In the Payroll Software You Prefer

    Not sure which is right for your business? We evaluate your existing setup and recommend the best fit before getting started.

    QuickBooks Payroll

    A natural fit for businesses already using QuickBooks for bookkeeping — payroll posts directly to your books.

    Gusto

    Cloud-based payroll popular with small businesses for its employee self-service and automated tax filings.

    WASHINGTON STATE

    Washington State Payroll Compliance

    Washington has several state-specific payroll obligations that out-of-state payroll services routinely miss.

    Washington L&I Workers Comp

    Washington requires workers compensation coverage through L&I for employees. Rates vary by risk class, and the average rate rose 4.9% for 2026.

    Paid Family & Medical Leave

    The 2026 premium is 1.13% of wages up to the Social Security wage base. Employees pay 71.43% of it through withholding; employers with 50 or more employees pay the rest.

    WA Cares Fund

    Washington's long-term care program requires a 0.58% premium withheld from employee wages and reported quarterly. Employees with an approved exemption are excluded — we track who is exempt.

    Washington Minimum Wage

    The statewide minimum wage is $17.13 per hour in 2026, and several cities, including Seattle, set higher local minimums.

    No State Income Tax Withholding

    Washington has no state income tax, so there is no state income tax to withhold from Washington wages. (A new 9.9% tax on household income above $1 million takes effect in 2028 and faces legal challenges, but it won't affect most households.)

    IMPORTANT

    Quick Payroll Facts for Business Owners

    Payroll mistakes are expensive. These are the issues we see most often.

    S-Corp Owners Must Pay Themselves a Salary

    An S-Corp owner who works in the business must receive reasonable compensation through payroll — not just distributions.

    Federal Tax Deposits Have Strict Deadlines

    Federal payroll tax deposits can be due within days of each payroll run. Late deposits trigger penalties starting at 2% and climbing to 10% for deposits more than 15 days late — and 15% if still unpaid after an IRS demand.

    Misclassifying Employees as Contractors Costs

    The IRS and Washington State both scrutinize worker classification. Misclassification can lead to back payroll taxes, penalties, and interest.

    W-2s and 1099s Are Due January 31

    Both W-2s to employees and 1099-NECs to contractors must be issued by January 31. For payments made in 2026, a 1099-NEC is required for contractors paid $2,000 or more.

    WHY IT MATTERS

    Payroll Mistakes Become Personal

    Federal income tax and the employee share of Social Security and Medicare withheld from paychecks are trust fund taxes — money you hold for the government. If they are not deposited, the IRS can assess the Trust Fund Recovery Penalty against the owners and managers responsible, personally. That is why payroll is one of the few areas where falling behind can follow you after a business closes. If deposits have already slipped, our back taxes and IRS notices service can help.

    Washington adds its own filings on top of the federal ones: quarterly L&I reports, Employment Security Department unemployment insurance reports, and Paid Family and Medical Leave and WA Cares reporting. Missing one of these state filings is a common reason businesses switch to us.

    Construction employers carry the heaviest L&I rates and the most classification risk — see our page for general contractors. Gas stations and convenience stores run hourly payroll across shifts — see our gas station tax page. We work in person through our Bothell tax preparation office and virtually statewide, including Kent. For S-Corp owners, read our guide to reasonable compensation, and if family works in the business, the tax benefits of hiring family members.

    How Payroll Setup Works

    1. 01

      Free consultation — we review your current payroll situation and needs

    2. 02

      Software setup — we set up QuickBooks Payroll or Gusto based on your preference

    3. 03

      Employee setup — we enter all employee information, tax withholding, and direct deposit

    4. 04

      First payroll — we run your first payroll and verify everything is correct

    5. 05

      Ongoing management — we handle payroll tax deposits, quarterly filings, and year-end W-2s

    PRICING

    What It Costs

    Payroll is quoted after a free consultation based on your number of employees, pay frequency, and states.

    See all pricing →
    Payroll ServicesQuoted after free consultation

    We never start work without agreeing on price first.

    Common Questions

    Payroll frequency options include weekly, biweekly, semi-monthly and monthly. The right frequency depends on your business type and employee preferences. S-Corp owner salary payroll is often run monthly or quarterly for simplicity since the amount is predetermined. Washington State has no specific required payroll frequency but employees must be paid at regular predetermined intervals that are established at the time of hire. PBX Tax recommends the right frequency based on each client's cash flow patterns and administrative preferences.

    Reasonable compensation is the salary an S-Corp owner must pay themselves for services performed in the business. The IRS uses reasonable compensation rules to prevent owners from avoiding payroll taxes by taking all income as distributions instead of salary. Determining the right amount involves researching what similar positions pay in the same geographic market and industry, factoring in experience, hours worked and business revenue. PBX Tax performs a reasonable compensation analysis as part of every S-Corp payroll setup to establish a defensible salary amount that protects against IRS scrutiny.

    Sole proprietors and single member LLCs taxed as disregarded entities are not required to run payroll for themselves since they are not considered employees of their own business. However, S-Corp owners are required to pay themselves a reasonable salary through payroll regardless of whether they have other employees. This distinction is one of the most important tax differences between operating as a standard LLC and making the S-Corp election. Getting this right from the start prevents costly corrections, back payroll taxes and potential IRS penalties later.

    The IRS failure to deposit penalty starts at 2 percent for deposits one to five days late and increases to 10 percent for deposits more than 15 days late. The Trust Fund Recovery Penalty can hold business owners personally liable for unpaid employee withholding taxes even after a business closes — making payroll tax debt one of the few business obligations that cannot be discharged. Washington State also imposes its own penalties for late L&I and PFML payments. Professional payroll management eliminates this risk entirely.

    Workers compensation through L&I, unemployment insurance through the Employment Security Department, Paid Family and Medical Leave at 1.13% of wages, and WA Cares at 0.58% of employee wages for non-exempt employees. There is no state income tax withholding.

    Payroll is quoted after a free consultation based on your number of employees, pay frequency, and the states you pay in.

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    GET STARTED

    Payroll Done Right Is One Less Thing to Worry About.

    Let us handle the complexity so you can focus on your business.

    Call +1 (425) 699-6990

    Last updated September 2026