Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax responsibilities to third-party payroll service companies. Third-party payroll service suppliers can improve service operations and assist meet filing deadlines and deposit requirements. Some of the services they provide are:

– Administering payroll and work taxes on behalf of the company where the employer provides 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 responsibilities should think about the following:

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the employer might forward the tax totals up 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 examine charges and interest on the employer’s account. The company is responsible for all taxes, charges and interest due. The employer may also be held personally responsible for specific unpaid federal taxes.
– If there are any issues with an account, then the IRS will send correspondence to the employer at the address of record. The IRS strongly suggests that the employer does not change their address of record to that of the payroll service company as it may considerably limit the employer’s ability to be informed of tax matters including their service.
– Electronic Funds Transfer (EFT) need to be used to transfer 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 companies can confirm that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and utilize this PIN to regularly confirm payments. A warning needs to go up the very first time a provider 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 permits employers to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have been prosecutions of people 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, accurate, and easy to use service that provides an instant confirmation for each transaction. This service is used totally free of charge from the U.S. Department of Treasury and to make and verify federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. To learn more, employers can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to speak with a customer support agent.

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

Employers who believe that an expense or notification received is a result of an issue with their payroll provider must get in touch with the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent out the costs, calling 800-829-4933 or visiting a local IRS office. To learn more about IRS notices, bills and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.