Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and associated tax tasks to third-party payroll service suppliers. Third-party can simplify business operations and assist meet filing deadlines and deposit requirements. A few of the services they provide are:

– Administering payroll and work taxes on behalf of the company where the company supplies the funds initially to the third-party.
– Reporting, gathering and transferring work taxes with state and federal authorities.

Employers who outsource some or all their payroll duties must consider the following:

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax totals up to the third-party to make the tax deposits, the company is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS may examine charges and interest on the company’s account. The company is responsible for all taxes, penalties and interest due. The employer might likewise be held personally liable for specific unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly recommends that the employer does not alter their address of record to that of the payroll company as it might considerably limit the employer’s capability to be informed of tax matters including their organization.
– Electronic Funds Transfer (EFT) should be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll service providers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and utilize this PIN to occasionally verify payments. A warning must go up the very first time a 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 enables companies 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 been prosecutions of individuals and companies, who acting under the look of a payroll provider, have actually taken funds planned for payment of employment taxes.

EFTPS is a protected, precise, and simple to use service that offers an immediate verification for each transaction. This service is used complimentary of charge from the U.S. Department of Treasury and permits companies to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the web or by phone. To find out more, employers can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment form or to speak to a client service representative.

Remember, employers are eventually responsible for the payment of earnings tax withheld and of both the company and employee parts of social security and Medicare taxes.

Employers who think that an expense or notice gotten is a result of a problem with their payroll company should get in touch with the IRS as soon as possible by calling the number on the expense, composing to the IRS office that sent the costs, calling 800-829-4933 or going to a local IRS office. For more info about IRS notifications, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.