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small business taxes /
small business accounting

When Do Payroll Funds Get Taken Out of a Small Business’s Bank Account?

November 14th, 2022 | 5 min. read

By Bret Asmussen

Direct deposit is an expected form of payment now. It means your employees can skip running to the bank each pay date, and they can easily access online paystubs. It also accommodates fully remote employees and helps you cut down on paper, ink, and delivery fees. However, it can feel less tangible of a concept to some employers than a paper check does.

When you own a small business, you want to make sure your employees get paid on time. This means you need to know how much money to have in the correct account by a certain time. If your payroll service doesn’t disclose this information clearly, you can end up with additional fees or, worse yet, unpaid and unhappy employees.

At CSI Accounting & Payroll, we’ve worked with thousands of small business owners over the past few decades. Often, these owners want to know:

  • When do I need to report my payroll information?
  • When does my payroll specialist process and collect my direct deposit funds?
  • When does my payroll specialist collect my payroll taxes?
  • How much is payroll tax?

Dates pinned on calendar for when payroll money is taken out of a business’s bank account

When Do I Need to Report my Payroll Information?

The first step to getting your employees paid each pay period is to report the hours worked to your payroll specialist.

Most businesses pay their employees on Fridays. If we’re assuming a Friday pay date (when direct deposit hits) and you work with CSI Accounting & Payroll, then ideally you would need to have your reporting done on that prior Monday.

If your employees aren’t paid on a Friday, the timeframe is still the same. You should have your reporting done four business days prior to the pay date. For example, if they get paid on a Monday, you need to have your reporting done by the prior Tuesday.

Larger, national payroll services tend to follow the same four-business-day rule for reporting.

When Does my Payroll Specialist Process and Collect my Direct Deposit Funds?

Still assuming that Friday pay date, CSI Accounting & Payroll processes your payroll on Monday (four business days prior to the pay date) and collects the direct deposit funds on Tuesday (three business days prior to the pay date).

If you don’t have enough funds in your account to pay your employees, we will notify you on Thursday (one business day prior to the pay date). If this occurs, your payroll specialist will contact you, and, depending on your situation, there may be an option to re-debit (provided the funds are now available.) In certain situations, you may be required to do a wire transfer.

Some banks now advertise that they can get employees their money up to two days early. This is simply referred to as “early direct deposit.” If your payroll specialist can accommodate this, your direct deposit funds are released early. Be sure to keep this in mind if you’re considering this option!

National payroll services process and collect your funds at different points between your reporting day and your employees’ pay date. Normally, your direct deposit funds, invoice amount, and taxes are taken out all at once before payday and impounded.

Impounding taxes is when a payroll company takes your money into its own bank account and then pays it out to where it's supposed to go only when it's due. This benefits the national service because they get a float on the interest from these funds. Because they have so many clients, they sometimes hold onto millions of dollars at once, which they can also use to cover temporary shortages when one of their clients bounces payroll. It is important to know that if you use one of these national services, you may be able to opt out of tax impounding.

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When Does my Payroll Specialist Collect my Payroll Taxes?

Generally, CSI pulls payroll taxes on your pay date, and we find out if the money was available in the account two business days later. We send the payroll taxes to the taxing authorities’ accounts the following business day.

How Much is Payroll Tax?

While it’s hard to pin down an exact amount that you’ll have to set aside for your payroll taxes, a quality payroll service like CSI will provide access to a payroll report that won’t leave you guessing. Our reports detail your cash requirements for:

  • Direct deposit
  • Payroll taxes
  • Your payroll service’s invoice amount

These amounts are shown in your online portal when you are reporting and previewing your payroll. This ensures you’ll know how much money to have in your account ahead of time to cover each of the amounts.

Learn more about payroll taxes here.

Work With a Local Payroll Service

With direct deposit becoming a mainstream form of payment, you should now have an idea of when you can expect your direct deposit and payroll tax funds to be collected, as well as how you can tell what payroll taxes you’ll owe and when you should report your payroll.

If you’re interested in seeing how a local payroll service can get your payroll done simply and transparently, we hope you’ll consider giving CSI Accounting & Payroll a try! Click the button below for a free consultation.


Not ready to talk yet? That’s okay! You can learn more about the cost of a payroll service first.

Bret Asmussen

Bret began working at CSI in 2007. Over the years, he worked his way up from an entry-level marketing position to his current role of manager of our payroll service. Bret is largely responsible for the growth of our payroll division over the last several years. His previous experience and knowledge in sales and management are exemplified in his success here. Bret has a college degree in Computer Networking, a skill that certainly comes in handy in an office environment. Bret is also a Certified Payroll Professional (CPP). Fun Fact: As an active duty member of the United States Marine Corps, he served in Operation Desert Shield and Desert Storm.