Outsourcing Payroll Duties

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

Many companies contract out some or all their and associated tax duties to third-party payroll service companies. Third-party payroll company can simplify service operations and help meet filing deadlines and deposit requirements. A few of the services they offer are:

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

Employers who contract out some or all their payroll obligations must consider the following:

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company 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 examine penalties and interest on the company’s account. The company is responsible for all taxes, charges and interest due. The employer might also be held personally responsible for specific overdue federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly suggests that the employer does not change their address of record to that of the payroll company as it may significantly restrict the employer’s capability to be notified of tax matters including their organization.
– Electronic Funds Transfer (EFT) should be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll companies are utilizing EFTPS, so the employers can confirm 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 verify payments. A warning must go up the very first time a provider misses out on a payment or makes a late payment. When an employer signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS permits companies to make any additional tax payments that their third-party service provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and business, who acting under the appearance of a payroll service provider, have stolen funds meant for payment of employment taxes.

EFTPS is a safe and secure, precise, and easy to use service that provides an immediate verification for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and permits employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. For more information, companies can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment kind or to talk to a customer care representative.

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

Employers who believe that an expense or notification received is an outcome of a problem with their payroll provider ought to call the IRS as quickly as possible by calling the number on the expense, composing to the IRS office that sent out the costs, calling 800-829-4933 or checking out a regional IRS office. For more details about IRS notices, expenses and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.