Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and related tax tasks to third-party payroll provider. Third-party payroll company can improve organization operations and help meet filing due dates and deposit requirements. A few of the services they provide are:

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

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

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the employer might forward the tax totals up to the third-party to make the tax deposits, the company is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS may examine penalties and interest on the company’s account. The company is accountable for all taxes, penalties and interest due. The company may also be held personally liable for particular unpaid federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the employer at the address of record. The IRS strongly recommends that the employer does not alter their address of record to that of the payroll provider as it might significantly restrict the company’s ability to be informed of tax matters involving their organization.
– Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll companies are utilizing EFTPS, so the employers can confirm that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and utilize this PIN to regularly confirm payments. A red flag ought to go up the first time a company misses a payment or makes a late payment. When an employer registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party supplier 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 company, have taken funds intended for payment of employment taxes.

EFTPS is a secure, accurate, and easy to utilize service that provides an instant confirmation for each deal. This service is used totally 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 internet or by phone. To learn more, companies can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration form or to talk to a client service representative.

Remember, companies are eventually accountable for the payment of earnings tax withheld and of both the company and staff member portions of social security and Medicare taxes.

Employers who believe that a bill or notice gotten is a result of a problem with their payroll service provider need to get in touch with the IRS as quickly as possible by calling the number on the bill, writing to the IRS workplace that sent out the bill, calling 800-829-4933 or visiting a regional IRS workplace. For more about IRS notices, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.