Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll service suppliers can simplify company operations and assist fulfill filing due dates and deposit requirements. Some of the services they provide are:

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

Employers who contract out some or all their payroll duties must think about the following:

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Although the company might forward the tax totals up to the third-party to make the tax deposits, the company is the responsible celebration. If the third-party stops working to make the federal tax payments, then the IRS might evaluate charges and interest on the company’s account. The employer is responsible for all taxes, charges and interest due. The company might likewise be held personally responsible for specific overdue federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly suggests that the employer does not change their address of record to that of the payroll provider as it might significantly restrict the company’s ability to be informed of tax matters involving their business.
– Electronic Funds Transfer (EFT) should be used to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll suppliers are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers ought to on the EFTPS system to get their own PIN and use this PIN to occasionally 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 online access to their payment history for 16 months. In addition, EFTPS enables employers to make any additional tax payments that their third-party service provider is not making on their behalf such as approximated tax payments. There have been prosecutions of people and business, who acting under the look of a payroll provider, have stolen funds planned for payment of work taxes.

EFTPS is a secure, precise, and easy to use service that offers an instant verification for each deal. This service is used free of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For more details, employers can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment kind or to talk with a customer care representative.

Remember, employers are eventually 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 received is a result of an issue with their payroll service supplier need to call the IRS as soon as possible by calling the number on the expense, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or going to a regional IRS office. For more details about IRS notifications, bills and payment choices, refer to Publication 594, The IRS Collection Process PDF.