Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax duties to third-party payroll company. Third-party payroll service companies can improve business operations and help fulfill filing due dates and deposit requirements. Some of the services they offer are:

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

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

– The employer is ultimately 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 celebration. If the third-party fails to make the federal tax payments, then the IRS might assess charges and interest on the company’s account. The company is accountable for all taxes, charges and interest due. The employer may also be held personally responsible for certain overdue federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly recommends that the employer does not alter their address of record to that of the payroll company as it might considerably restrict the company’s capability to be informed of tax matters including their organization.
– Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll companies are using EFTPS, so the employers can confirm that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and utilize this PIN to periodically confirm payments. A red flag should go up the very first time a provider misses out on a payment or makes a late payment. When an employer registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers 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 individuals and companies, who acting under the look of a payroll company, have stolen funds planned for payment of employment taxes.

EFTPS is a secure, accurate, and simple to utilize service that supplies an immediate confirmation for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and permits employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For additional information, employers can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration type or to speak with a customer support agent.

Remember, employers are ultimately accountable for the payment of income tax kept and of both the employer and staff member portions of social security and Medicare taxes.

Employers who think that an expense or notice received is a result of an issue with their payroll provider must contact the IRS as soon as possible by calling the number on the costs, writing to the IRS office that sent out the expense, calling 800-829-4933 or visiting a office. To learn more about IRS notices, bills and payment choices, describe Publication 594, The IRS Collection Process PDF.