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Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax tasks to third-party payroll provider. Third-party payroll service providers can simplify service operations and assist fulfill filing deadlines and deposit requirements. Some of the services they provide are:

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

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

– The employer 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 company is the responsible party. If the third-party stops working to make the federal tax payments, then the IRS may evaluate charges and interest on the employer’s account. The employer is liable for all taxes, penalties and interest due. The company might also be held personally responsible for specific unsettled federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly suggests that the company does not change their address of record to that of the payroll company as it may considerably limit the employer’s ability to be informed of tax matters including their organization.
– Electronic Funds (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll 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 periodically validate payments. A red flag needs to increase the very first time a 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 enables 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 business, who acting under the look of a payroll service supplier, have stolen funds meant for payment of work taxes.

EFTPS is a safe, accurate, and simple to utilize service that supplies an immediate confirmation for each deal. This service is provided free of charge from the U.S. Department of Treasury and allows companies to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. For more info, companies can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment form or to speak with a client service agent.

Remember, employers are ultimately accountable for the payment of earnings tax withheld and of both the employer and worker parts of social security and Medicare taxes.

Employers who believe that an expense or notification gotten is a result of a problem with their payroll service provider need to get in touch with the IRS as quickly as possible by calling the number on the expense, writing to the IRS workplace that sent out the bill, calling 800-829-4933 or checking out a regional IRS office. For more information about IRS notifications, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.