Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound business practice, however … Know your tax obligations as an employer

Many companies contract out some or all their payroll and related tax duties to third-party payroll provider. Third-party payroll company can enhance business and assist fulfill filing due dates and deposit requirements. A few of the services they offer are:

– Administering payroll and work taxes on behalf of the company where the employer supplies the funds at first to the third-party.
– Reporting, gathering 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 ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the employer might forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible party. If the third-party stops working to make the federal tax payments, then the IRS might assess penalties and interest on the employer’s account. The employer is accountable for all taxes, penalties and interest due. The company may also be held personally responsible for certain unpaid federal taxes.
– If there are any issues with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly suggests that the company does not change their address of record to that of the payroll provider as it may substantially restrict the employer’s ability to be notified of tax matters involving their service.
– Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll suppliers are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and use this PIN to regularly confirm payments. A warning ought to increase the very first time a service provider misses a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have been prosecutions of people and business, who acting under the look of a payroll provider, have actually stolen funds planned for payment of work taxes.

EFTPS is a safe, precise, and easy to use service that provides an instant confirmation for each deal. This service is offered free of charge from the U.S. Department of Treasury and enables employers to make and confirm federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. For additional information, employers can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration form or to talk with a client service representative.

Remember, companies are ultimately responsible for the payment of income tax kept and of both the employer and employee parts of social security and Medicare taxes.

Employers who think that a costs or notice received is an outcome of a problem with their payroll service company need to contact the IRS as quickly as possible by calling the number on the costs, writing to the IRS workplace that sent out the expense, calling 800-829-4933 or checking out a regional IRS workplace. To learn more about IRS notices, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.