Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax tasks to third-party payroll service companies. Third-party payroll company can streamline company operations and assist meet filing deadlines and deposit requirements. A few of the services they supply are:

– Administering payroll and employment taxes on behalf of the company where the company supplies 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 duties need to consider the following:

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company may forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible celebration. If the third-party stops working to make the federal tax payments, then the IRS may assess charges and interest on the employer’s account. The employer is liable for all taxes, charges and interest due. The employer might also be held personally responsible for certain unpaid federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly suggests that the employer does not alter their address of record to that of the payroll provider as it may considerably limit the employer’s ability to be informed of tax matters involving their organization.
– Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll providers are using EFTPS, so the employers 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 utilize this PIN to periodically verify payments. A red flag should increase the first time a company misses a payment or makes a late payment. When a company registers 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 people and companies, who acting under the appearance of a payroll provider, have actually taken funds planned for payment of work taxes.

EFTPS is a safe, precise, and simple to utilize service that provides an instant confirmation for each deal. This service is provided complimentary of charge from the U.S. Department of Treasury and permits employers to make and confirm federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For additional information, companies can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment kind or to talk to a client service agent.

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

Employers who think that a bill or notice gotten is an outcome of a problem with their supplier should call the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent the expense, calling 800-829-4933 or checking out a local IRS office. For more information about IRS notices, costs and payment alternatives, describe Publication 594, The IRS Collection Process PDF.