Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and associated tax tasks to third-party payroll service companies. Third-party payroll service companies can streamline business operations and help meet filing deadlines and deposit requirements. A few of the services they offer are:

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

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

– The employer is eventually accountable for the deposit and payment of federal tax liabilities. Although the employer might forward the tax totals 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 employer’s account. The company is responsible for all taxes, charges and interest due. The employer might also be held personally responsible for certain unsettled federal taxes.
– If there are any issues with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly suggests that the employer does not alter their address of record to that of the payroll provider as it might substantially limit the company’s capability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). need to ensure their payroll providers are utilizing EFTPS, so the employers can validate that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and utilize this PIN to regularly confirm payments. A red flag ought to increase the first time a company misses out on a payment or makes a late payment. When an employer signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits companies to make any additional tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have actually been prosecutions of individuals and business, who acting under the look of a payroll service supplier, have actually stolen funds planned for payment of work taxes.

EFTPS is a protected, accurate, and simple to utilize service that offers an instant confirmation for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and enables employers to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. For additional information, employers can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to speak to a customer support agent.

Remember, companies are eventually accountable 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 costs or notification received is a result of a problem with their payroll provider ought to get in touch with the IRS as quickly as possible by calling the number on the bill, writing to the IRS office that sent out the bill, calling 800-829-4933 or checking out a local IRS workplace. To learn more about IRS notices, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.