Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and associated tax tasks to third-party payroll service suppliers. Third-party payroll service providers can improve business operations and assist satisfy filing deadlines and deposit requirements. Some of the services they offer are:

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

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

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Even though the company 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 penalties and interest on the employer’s account. The employer is accountable for all taxes, charges and interest due. The employer may also be held personally liable for particular unpaid 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 employer does not change their address of record to that of the payroll company as it may significantly restrict the company’s ability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) should be utilized to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll suppliers are using EFTPS, so the companies can validate that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to regularly verify payments. A red flag ought to go up 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 online access to their payment history for 16 months. In addition, EFTPS enables companies to make any additional tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and companies, who acting under the look of a payroll company, have stolen funds intended for payment of employment taxes.

EFTPS is a secure, precise, and simple to utilize service that offers an instant confirmation for each transaction. This service is provided free of charge from the U.S. Department of Treasury and permits companies to make and verify federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. To learn more, employers can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment type or to speak to a client service representative.

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

Employers who think that a bill or notification received is an outcome of an issue with their payroll company ought to call the IRS as quickly as possible by calling the number on the costs, writing to the that sent the bill, calling 800-829-4933 or going to a local IRS workplace. For more details about IRS notifications, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.