Outsourcing Payroll Duties

Outsourcing payroll duties can be a sound organization practice, but … Know your tax obligations as a company

Many employers contract out some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll service suppliers can enhance organization operations and help meet filing due dates and deposit requirements. Some of the services they offer are:

– Administering payroll and employment taxes on behalf of the employer where the employer supplies 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 responsibilities should think about the following:

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Despite the fact that the employer may forward the tax amounts 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 employer’s account. The company is liable for all taxes, penalties and interest due. The company may also be held personally responsible for specific unsettled 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 strongly suggests that the employer does not change their address of record to that of the payroll provider as it might considerably limit the employer’s capability to be notified of tax matters involving their .
– 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 need to ensure their payroll providers are utilizing EFTPS, so the employers can verify 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 occasionally confirm payments. A warning ought to go up the very first time a service provider 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 enables 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 appearance of a payroll service company, have stolen funds meant for payment of employment taxes.

EFTPS is a safe, precise, and easy to utilize service that offers an instant confirmation for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and allows employers to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. For additional information, employers can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration form or to talk to a consumer service representative.

Remember, companies are ultimately 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 an expense or notification gotten is an outcome 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 expense, calling 800-829-4933 or going to a local IRS workplace. For additional information about IRS notices, costs and payment options, refer to Publication 594, The IRS Collection Process PDF.