The Best Time of Year to Switch Payroll Providers (Hint: It’s Now)

The Best Time of Year to Switch Payroll Providers (Hint: It’s Now)
To make switching payroll providers as hassle-free as possible, the beginning of the year is the best time to do it.
by Mallory A. Russell Nov 16, 2022 — 2 min read
The Best Time of Year to Switch Payroll Providers (Hint: It’s Now)

Have you been thinking about switching payroll providers? The beginning of the year is the best time to do it. Why? By starting with a new provider at the beginning of the year, you won’t have to go through the hassle of collecting all your year-to-date and quarter-to-date information from your old provider. Your new payroll provider can start fresh for the new year.

With that in mind, we’ve outlined three simple steps to transition payroll processing at the start of a new year. (Be sure to check with a professional for any details that might apply to your specific situation.)

1. Set your first pay date of the new year.

To make things as clean as possible, be sure your last pay date of the year is with your old provider, and your first pay date of the year is with your new provider.

For example, if you have a pay period of December 16 to December 31, 2020, with a pay date of January 5, 2021, that cycle should ideally be with your new provider since it will be reported on your 2021 W-2s (which your new provider will prepare). Your previous provider will prepare the 2020 W-2s.

Payroll taxes are based on when wages are paid, not when employees worked. Any wages you pay in January, regardless of the actual pay period, will be included in the new year’s wages for tax purposes (and annual W-2s).

2. Close your payroll account with your previous payroll provider.

Before you close your account with your old provider, don’t forget to save copies of all employee information, payroll reports, and annual tax forms for your own records. Keep in mind that some payroll providers restrict access to this information after you close your account, so be sure to download or ask for this data ahead of canceling.

3. Have your business information ready.

Have the following information on hand when switching providers:

Let’s walk through an example (using Square Payroll as your new provider).


What to expect from your previous provider:

What to expect from Square:

What if you’re not switching at the beginning of a year?

If you’re switching in the middle of a quarter, talk to your former payroll provider and clarify which tax payments and filings they will make on your behalf. Your previous provider should refund any quarterly taxes collected, but not submitted, to the IRS and/or state to you. If you work with a new provider like Square Payroll, they will re-collect and submit those specific taxes on your behalf. Your prior provider should pay any federal and state income taxes collected.

As always, talk with your accountant or financial advisor before you switch providers. They should be able to help you through the process.

Mallory A. Russell
Mallory Russell is the Head of Content Marketing at Square.


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