Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound organization practice, but … 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 enhance business operations and assist satisfy filing deadlines and deposit requirements. Some of the services they offer are:

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

Employers who outsource some or all their payroll responsibilities ought to think about the following:

– The is ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the employer may forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible party. If the third-party fails to make the federal tax payments, then the IRS may evaluate charges and interest on the company’s account. The company is liable for all taxes, penalties and interest due. The employer may also be held personally liable for certain unpaid federal taxes.
– If there are any problems with an account, then the IRS will send out correspondence to the company 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 employer’s ability to be notified of tax matters involving their business.
– Electronic Funds Transfer (EFT) need to be utilized to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll suppliers are utilizing EFTPS, so the employers can validate 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 verify payments. A warning ought to increase the first time a company misses out on a payment or makes a late payment. When an employer signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits companies to make any extra 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 companies, who acting under the appearance of a payroll provider, have stolen funds planned for payment of employment taxes.

EFTPS is a protected, precise, and easy to utilize service that supplies an instant verification for each transaction. This service is used totally free of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments electronically 24 hr a day, 7 days a week through the web or by phone. To learn more, companies can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment form or to talk to a customer care agent.

Remember, companies are ultimately accountable for the payment of earnings tax withheld and of both the employer 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 provider ought to contact the IRS as quickly as possible by calling the number on the expense, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or going to a local IRS workplace. To find out more about IRS notifications, bills and payment choices, describe Publication 594, The IRS Collection Process PDF.