Outsourcing Payroll Duties

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

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

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

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

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Even though the company may forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS may examine penalties and interest on the . The employer is responsible for all taxes, charges and interest due. The company may also be held personally liable for particular overdue federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the employer at the address of record. The IRS highly suggests that the company does not alter their address of record to that of the payroll provider as it may substantially restrict the employer’s capability to be notified of tax matters including their company.
– 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 ought to guarantee their payroll companies are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and utilize this PIN to periodically verify payments. A warning must go up the very first time a service 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 enables employers to make any extra tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll provider, have stolen funds intended for payment of employment taxes.

EFTPS is a safe, accurate, and easy to utilize service that provides an instant verification for each deal. This service is offered complimentary of charge from the U.S. Department of Treasury and permits employers to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more info, employers can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration type or to speak with a client service representative.

Remember, employers are eventually responsible for the payment of income tax kept and of both the company 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 need to contact the IRS as quickly as possible by calling the number on the expense, composing to the IRS workplace that sent the expense, calling 800-829-4933 or going to a local IRS office. For more information about IRS notifications, costs and payment choices, refer to Publication 594, The IRS Collection Process PDF.