Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and associated tax duties to third-party payroll service providers. Third-party payroll company can streamline company operations and help satisfy filing due dates and deposit requirements. Some of the services they supply are:

– Administering payroll and work taxes on behalf of the employer where the company 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 obligations need to consider the following:

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Even though the employer might forward the 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 might evaluate penalties and interest on the company’s account. The company is liable for all taxes, penalties and interest due. The company might likewise be held personally liable for particular 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 highly suggests that the company does not alter their address of record to that of the payroll provider as it might significantly restrict the employer’s ability to be notified of tax matters including their organization.
– Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll suppliers are utilizing EFTPS, so the employers can validate 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 regularly verify payments. A warning ought to increase the first time a service company misses a payment or makes a late payment. When an employer signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows companies to make any additional tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have been prosecutions of people and companies, who acting under the look of a payroll service company, have actually stolen funds meant for payment of employment taxes.

EFTPS is a safe and secure, accurate, and easy to utilize service that offers an immediate verification for each deal. This service is used totally 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 internet or by phone. For additional information, employers can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to speak to a client service agent.

Remember, employers are ultimately 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 notice received is an outcome of a problem with their payroll provider should contact the IRS as soon as possible by calling the number on the bill, composing to the IRS office that sent out the bill, calling 800-829-4933 or checking out a regional IRS office. To find out more about IRS notifications, expenses and payment options, refer to Publication 594, The IRS Collection Process PDF.