Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax responsibilities to third-party payroll provider. Third-party payroll company can simplify service operations and help meet filing deadlines and deposit requirements. Some of the services they provide are:

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

Employers who contract out some or all their payroll duties should think about the following:

– The employer is eventually accountable for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS might assess charges and interest on the employer’s account. The company is liable for all taxes, penalties and interest due. The company may also be held personally responsible for particular overdue federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly suggests that the company does not alter their address of record to that of the payroll company as it may substantially restrict the employer’s capability to be informed of tax matters including their organization.
– Electronic Funds Transfer (EFT) must be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll suppliers are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to occasionally confirm payments. A red flag needs to go up the very first time a company misses out on a payment or makes a late payment. When a company registers on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits employers to make any additional tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the look of a payroll company, have taken funds planned for payment of employment taxes.

EFTPS is a safe and secure, accurate, and simple to use service that supplies an instant confirmation for each deal. This service is used totally free of charge from the U.S. Department of Treasury and to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. For more details, employers can register online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment form or to talk to a client service agent.

Remember, companies are ultimately accountable for the payment of income tax withheld and of both the company and staff member 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 service company ought to contact the IRS as quickly as possible by calling the number on the costs, composing to the IRS office that sent the bill, calling 800-829-4933 or visiting a local IRS office. To find out more about IRS notices, costs and payment options, describe Publication 594, The IRS Collection Process PDF.