Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound business practice, but … Know your tax duties as a company

Many employers outsource some or all their payroll and related tax responsibilities to third-party payroll service suppliers. Third-party payroll provider can improve company operations and assist fulfill filing due dates and deposit requirements. A few of the services they offer are:

– Administering payroll and employment taxes on behalf of the employer where the employer offers the funds at first to the third-party.
– Reporting, gathering and depositing work taxes with state and federal authorities.

Employers who outsource some or all their payroll obligations ought to think about the following:

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Although the company may forward the tax amounts to the third-party to make the tax deposits, the company is the responsible party. If the third-party fails to make the federal tax payments, then the IRS may examine penalties and interest on the company’s account. The company is accountable for all taxes, penalties and interest due. The company may likewise be held personally accountable for specific unsettled federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS strongly recommends that the employer does not alter their address of record to that of the payroll company as it might considerably restrict the company’s ability to be notified of tax matters involving their service.
– Electronic Funds Transfer (EFT) need to be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll providers are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and use this PIN to periodically validate payments. A red flag needs to go up the first time a company misses a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables employers to make any additional tax payments that their third-party service provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and companies, who acting under the look of a payroll company, have actually taken funds meant for payment of employment taxes.

EFTPS is a secure, precise, and simple to utilize service that supplies an immediate verification for each transaction. This service is used free of charge from the U.S. Department of Treasury and enables employers to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. To learn more, employers can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration form or to consult with a customer support representative.

Remember, employers are eventually responsible for the payment of withheld and of both the employer and staff member portions of social security and Medicare taxes.

Employers who believe that an expense or notification received is a result of a problem with their payroll provider need to call the IRS as soon as possible by calling the number on the costs, composing to the IRS workplace that sent the bill, calling 800-829-4933 or checking out a regional IRS workplace. To learn more about IRS notifications, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.