Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll company can streamline business operations and assist meet filing deadlines and deposit requirements. A few of the services they offer are:

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

Employers who outsource some or all their payroll obligations should think about the following:

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Although the company 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 might examine penalties and interest on the company’s account. The company is accountable for all taxes, charges and interest due. The employer may likewise be held personally accountable for particular overdue federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly suggests that the employer does not alter their address of record to that of the payroll company as it may significantly restrict the employer’s ability to be informed of tax matters including their company.
– Electronic Funds Transfer (EFT) should be utilized to transfer 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 companies can validate that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and use this PIN to periodically validate payments. A red flag must increase the first time a service company misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows companies 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 and companies, who acting under the appearance of a payroll service company, have taken funds intended for payment of work taxes.

EFTPS is a protected, precise, and easy to use service that provides an instant confirmation for each transaction. This service is provided complimentary of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. For more details, employers can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment type or to speak with a customer support agent.

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

Employers who believe that a costs or notification gotten is a result of an issue with their payroll service company ought to contact the IRS as soon as possible by calling the number on the costs, writing to the IRS workplace that sent out the expense, calling 800-829-4933 or visiting a regional IRS workplace. For additional information about IRS notices, expenses and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.