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Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax responsibilities to third-party payroll service suppliers. Third-party payroll service providers can improve service operations and assist satisfy filing due dates and deposit requirements. A few of the services they offer are:

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

Employers who contract out some or all their payroll responsibilities should consider the following:

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Although the company may forward the tax totals up to the third-party to make the tax deposits, the company is the accountable party. If the third-party fails to make the federal tax payments, then the IRS may evaluate penalties and interest on the company’s account. The company is liable for all taxes, penalties and interest due. The employer might also be held personally liable for specific unsettled federal taxes.
– If there are any problems with an account, then the IRS will send out correspondence to the company at the address of record. The IRS strongly suggests that the company does not alter their address of record to that of the payroll company as it may considerably restrict the company’s capability to be informed of tax matters involving their organization.
– 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 must guarantee their payroll providers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally confirm payments. A warning should increase the very first time a service company misses out on 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 permits companies to make any extra tax payments that their third-party 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 actually taken funds intended for payment of work taxes.

EFTPS is a safe and secure, precise, and easy to utilize service that provides an instant verification for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and allows employers to make and verify federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. To find out more, companies can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment form or to speak to a customer service representative.

Remember, employers are eventually accountable for the payment of earnings tax kept and of both the company and staff member portions of social security and Medicare taxes.

Employers who believe that an expense or notification received is an outcome of a problem with their payroll company must contact the IRS as quickly as possible by calling the number on the expense, writing to the IRS office that sent out the costs, calling 800-829-4933 or visiting a office. For additional information about IRS notifications, costs and payment options, describe Publication 594, The IRS Collection Process PDF.