"I used to handle the payroll myself from a computer in my office -- but it was a tremendous headache," says David Walker, co-owner of Mike Lewis & Associates, in Midland, Tex., a real-estate-management company with 45 employees. So he decided a few years ago to contract with Advantage Payroll Services, an outside payroll-services company in Auburn, Maine. Before Walker chose Advantage, he investigated the following issues:

* How streamlined will communications be each payroll period? Look for a simple, two-stage process like Advantage's: When new clients sign up, they provide a complete list of every employee's name, address, dependents, marital history, and previous earnings during the year. After that, they supply biweekly earnings updates by phone, fax, or modem.

* Does the service include complete paycheck preparations? Payroll services that provide only record-keeping operations aren't worth the cost.

* Is the payroll service qualified to handle federal and state tax filings? Since those are complicated and time-consuming, it's smart to look for a company that will prepare all tax forms.

* How costly is the service, compared with what it would cost you to upgrade your internal capabilities? Walker pays about $75 per payroll, which seems like a bargain given the time it's saved him. Rates vary, depending on client size.

* Who's got bottom-line responsibility for payroll-tax-filing accuracy? Advantage guarantees it will pay payroll taxes and file federal and state reports accurately and on time -- or absorb any penalties that result from its failure to do so. That's a guarantee worth demanding.

-- Jill Andresky Fraser

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