When do you need payroll software?
Paying one employee by bank transfer feels simple until the first payroll tax deadline arrives.
Short answer
In the US, the day you hire your first W-2 employee. From then on you're withholding taxes, paying them on a schedule and filing returns. Payroll software does the arithmetic and the filings, and a missed deposit usually costs more in penalties than a year of the software.
What payroll software takes off your desk
- Working out federal and state withholding on every pay run.
- Paying those taxes on time and filing the quarterly and annual returns.
- Year-end forms for employees (W-2) and contractors (1099).
- Posting each pay run to your ledger so the books match what left the bank.
What Gusto costs (US list prices)
| Plan | Base | Per person | Five people | Main addition |
|---|---|---|---|---|
| Simple | $49 | $6 | $79 / month | Single-state payroll and tax filing |
| Plus | $80 | $12 | $140 / month | Multi-state payroll, next-day pay, time tracking |
| Premium | $180 | $22 | $290 / month | HR advice and priority support |
Gusto closed its Contractor Only plan to new customers in October 2026. Contractors can be paid on any plan and are billed at that plan's per-person rate only in months you pay them.
Gusto or your ledger's own payroll?
If you run QuickBooks Online, its own payroll add-on keeps everything in one subscription. If you run Xero, or you want payroll that works whichever ledger you pick, Gusto connects to both and posts each pay run for you. Compare the total monthly cost for your headcount; per-person fees matter more than the base price once you pass five people.
Set these up before your first pay run
- Your federal EIN and state payroll tax account numbers.
- A Form W-4 and state withholding form for each employee.
- A W-9 for each contractor before you pay them.
- A separate payroll liabilities account in your ledger, so taxes withheld don't look like spare cash.
General information about US payroll, not tax advice for your situation.
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