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Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound business practice, however … Know your tax responsibilities as a company

Many companies contract out some or all their payroll and related tax responsibilities to third-party payroll provider. Third-party payroll company can simplify organization operations and assist fulfill filing deadlines and deposit requirements. A few of the services they provide are:

– Administering payroll and work taxes on behalf of the employer where the employer provides 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 ought to think about the following:

– The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Although the 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 stops working to make the federal tax payments, then the IRS may evaluate charges and interest on the company’s account. The employer is accountable for all taxes, penalties and interest due. The employer might likewise be held personally responsible for specific overdue 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 highly suggests that the employer does not change their address of record to that of the payroll service company as it might significantly limit the company’s ability to be notified of tax matters involving their service.
– Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll companies are using EFTPS, so the employers can verify that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and use this PIN to occasionally validate payments. A red flag should increase the very first time a 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 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 business, who acting under the look of a payroll provider, have actually taken funds intended for payment of employment taxes.

EFTPS is a safe, precise, and simple to use service that provides an immediate confirmation for each transaction. This service is offered complimentary of charge from the U.S. Department of Treasury and enables employers to make and verify federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. To find out more, employers can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration kind or to talk with a customer support representative.

Remember, companies are ultimately responsible for the payment of income tax kept and of both the company and staff member parts of social security and Medicare taxes.

Employers who believe that a bill or notification received is a result of an issue with their payroll service provider need to call the IRS as soon as possible by calling the number on the costs, composing to the IRS office that sent the bill, calling 800-829-4933 or checking out a regional IRS office. For more details about IRS notifications, expenses and payment choices, refer to Publication 594, The IRS Collection Process PDF.