It is common for a company to switch payroll providers midway through the year. This can happen at any point during the year and isn’t restricted to the beginning of a quarter.
When a company decides to leave its previous payroll provider, there are frequently payroll taxes that were accrued but remain unpaid because the due dates haven’t been reached at the time of the company’s departure.
Buddy Punch Payroll on the other hand, will be processing payroll for the company when the due date is reached. This means Buddy Punch Payroll needs to process a collection of any unpaid tax liabilities in order to have the funding to remit those payments on a company’s behalf. This collection is known as a “Mid-Quarter Collection.”
The collection usually includes state unemployment, federal unemployment, and local taxes, but it can also include federal and state income taxes based on the company’s first check date and the due dates of the tax liability.
During the Tax Implementation process, our team will identify and communicate the amount of the expected collection. This amount is negotiable! If you indicate a tax was in fact paid by the previous provider, the collection amount will be adjusted to remove that item from the total.
The collection is scheduled for the first business day of the month following the company’s start date. For example, a company that starts on February 15th, will have a Mid-Quarter Collection processed on March 1st (assuming the first is not a weekend).
Because the Mid-Quarter Collection can include income taxes that are paid on a Monthly payment frequency, it is important to note that a company starting later in the month would still have the same due date. This ensures Buddy Punch Payroll is properly funded for all pending tax payments and avoids late payment penalties.