Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound organization practice, but … Know your tax duties as an employer

Many employers contract out some or all their payroll and related tax responsibilities to third-party payroll service suppliers. Third-party payroll service suppliers can streamline organization operations and help satisfy filing deadlines and deposit requirements. Some of the services they supply are:

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

Employers who outsource some or all their payroll responsibilities need to think about the following:

– The employer is eventually accountable for the deposit and payment of federal tax liabilities. Although the employer may forward the tax amounts to the third-party to make the tax deposits, the company is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS may evaluate penalties and interest on the company’s account. The company is accountable for all taxes, charges and interest due. The employer may also be held personally accountable for particular unpaid federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly suggests that the employer does not alter their address of record to that of the payroll service provider as it may significantly restrict the company’s capability to be informed of tax matters involving their business.
– Electronic Funds Transfer (EFT) need to be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll service providers are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and use this PIN to occasionally verify payments. A red flag ought to go up the very first time a service provider misses a payment or makes a late payment. When an employer registers on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS allows companies to make any additional tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have actually been prosecutions of people and business, who acting under the look of a company, have actually stolen funds meant for payment of employment taxes.

EFTPS is a secure, precise, and simple to utilize service that supplies an immediate confirmation for each deal. This service is used totally free of charge from the U.S. Department of Treasury and permits companies to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more information, companies can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to speak with a client service agent.

Remember, companies are ultimately responsible for the payment of earnings tax withheld and of both the company and staff member portions of social security and Medicare taxes.

Employers who believe that a bill or notice gotten is an outcome of a problem with their payroll provider should get in touch with the IRS as quickly as possible by calling the number on the costs, composing to the IRS office that sent the costs, calling 800-829-4933 or visiting a local IRS office. For additional information about IRS notifications, expenses and payment alternatives, describe Publication 594, The IRS Collection Process PDF.