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Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax duties to third-party payroll service companies. Third-party payroll service companies can enhance organization operations and help satisfy filing deadlines and deposit requirements. Some of the services they supply are:

– Administering payroll and work taxes on behalf of the employer where the employer provides the funds at first to the third-party.
– Reporting, gathering and depositing work taxes with state and federal authorities.

Employers who outsource some or all their payroll duties should consider the following:

– The company is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the employer might forward the tax amounts to the third-party to make the tax deposits, the company is the responsible party. If the third-party stops working to make the federal tax payments, then the IRS may assess charges and interest on the company’s account. The employer is liable for all taxes, penalties and interest due. The company might likewise be held personally responsible for particular unpaid federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly suggests that the company does not change their address of record to that of the payroll service company as it may substantially limit the company’s ability to be notified of tax matters involving their service.
Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll service providers are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and use this PIN to regularly confirm payments. A warning needs to go up the first time a provider misses a payment or makes a late payment. When a company 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 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 taken funds meant for payment of work taxes.

EFTPS is a secure, precise, and easy to utilize service that supplies an immediate verification for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and allows employers to make and verify federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For more details, employers can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration kind or to speak with a client service representative.

Remember, employers are eventually responsible for the payment of earnings tax kept and of both the employer and staff member parts of social security and Medicare taxes.

Employers who believe that a bill or notification gotten is a result of a problem with their payroll company ought to get in touch with the IRS as quickly as possible by calling the number on the bill, writing to the IRS office that sent the bill, calling 800-829-4933 or visiting a local IRS office. For more details about IRS notifications, bills and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.