Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and associated tax tasks to third-party payroll provider. Third-party payroll company can simplify company operations and assist meet filing due dates and deposit requirements. Some of the services they offer are:

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

Employers who contract out some or all their payroll obligations must consider the following:

– The company is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the employer might 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 assess charges and interest on the employer’s account. The employer is liable for all taxes, penalties and interest due. The employer may likewise be held personally accountable for specific unpaid federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the employer at the of record. The IRS highly recommends that the company does not change their address of record to that of the payroll company as it may significantly restrict the employer’s ability to be notified of tax matters including their service.
– Electronic Funds Transfer (EFT) should be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll service providers are using EFTPS, so the companies can verify 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 verify 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 allows companies to make any extra tax payments that their third-party service provider is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and business, who acting under the look of a payroll provider, have actually taken funds planned for payment of work taxes.

EFTPS is a safe, accurate, and simple to use service that provides an immediate confirmation for each deal. This service is used 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, companies can register online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to speak to a customer care representative.

Remember, employers are ultimately responsible for the payment of earnings tax withheld and of both the company and staff member parts of social security and Medicare taxes.

Employers who believe that a costs or notification gotten is an outcome of an issue with their payroll company must get in touch with the IRS as soon as possible by calling the number on the bill, composing to the IRS office that sent the costs, calling 800-829-4933 or going to a regional IRS workplace. For more details about IRS notifications, costs and payment options, describe Publication 594, The IRS Collection Process PDF.