Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound business practice, but … Know your tax obligations as a company

Many companies contract out some or all their payroll and associated tax duties to third-party payroll provider. Third-party payroll provider can improve service 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 employer offers the funds initially to the third-party.
– Reporting, collecting and transferring employment taxes with state and federal authorities.

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

– The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though the company may forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS might assess penalties and interest on the company’s account. The company is liable for all taxes, charges and interest due. The company may likewise be held personally accountable for particular unsettled 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 employer does not change their address of record to that of the payroll company as it may significantly limit the employer’s ability to be notified of tax matters including their organization.
– Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is made using Tax Payment System (EFTPS). Employers ought to guarantee their payroll suppliers are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers need to sign up on the EFTPS system to get their own PIN and use this PIN to occasionally verify payments. A red flag needs to go up the first time a service company misses out on 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 employers to make any additional tax payments that their third-party provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and companies, who acting under the appearance of a payroll service provider, have stolen funds planned for payment of work taxes.

EFTPS is a secure, accurate, and simple to use service that supplies an instant verification for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and permits companies to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. For additional information, companies can enroll online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment type or to speak to a client service representative.

Remember, employers are ultimately accountable for the payment of income tax kept and of both the employer and staff member portions of social security and Medicare taxes.

Employers who believe that a bill or notification received is an outcome of an issue with their payroll service supplier need to contact the IRS as quickly as possible by calling the number on the bill, composing to the IRS office that sent the expense, calling 800-829-4933 or checking out a regional IRS office. For more info about IRS notices, costs and payment choices, describe Publication 594, The IRS Collection Process PDF.