Growing Team: Payroll, ACA Compliance, and HR Tax Issues

With six or more employees, payroll complexity accelerates and ACA compliance thresholds loom. A payroll service becomes practical, and your CPA's focus shifts from administration to strategic compensation planning.

Compliance burden scales significantly. Everything required for smaller teams applies -- Forms 940, 941, W-2s, deposit schedules -- but the stakes increase. More employees means higher aggregate trust fund liability, more withholding calculations, and more state-level filings. Errors multiply across headcount.

ACA thresholds come into view. The Affordable Care Act employer mandate applies to businesses with 50 or more full-time equivalent employees. Even at 6+ employees, your CPA should track your FTE count annually. If you are growing, you could cross the threshold sooner than expected. Penalties under Section 4980H for failing to offer qualifying coverage start at $2,970 per employee per year (2024 amount, indexed annually).

A payroll service becomes practical. At this size, most CPAs recommend a payroll provider (ADP, Gusto, Paychex) to handle deposit calculations, tax filings, and compliance tracking. Your CPA reviews the reports rather than processing payroll manually. This reduces error risk and frees your CPA for advisory work.

The tradeoff: More employees means more tax complexity, but it also means more deductible compensation expense. A CPA helps you structure compensation -- salary, benefits, retirement contributions -- to maximize deductions while staying compliant.