Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax tasks to third-party payroll service suppliers. Third-party payroll company can simplify organization operations and help satisfy filing due dates and deposit requirements. A few of the services they provide are:

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

Employers who contract out some or all their payroll obligations ought to think about the following:

— The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the employer may forward the tax totals up to the third-party to make the tax deposits, the company is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS may assess charges and interest on the company’s account. The employer is responsible for all taxes, charges and interest due. The company may also be held personally responsible for specific unpaid federal taxes.
— If there are any issues with an account, then the IRS will send out 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 company as it might considerably restrict the company’s ability to be notified of tax matters including their business.
— Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll service providers are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and use this PIN to occasionally validate payments. A warning needs to increase the very first time a provider 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 permits companies to make any additional tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and business, who acting under the look of a payroll service company, have taken funds planned for payment of work taxes.

EFTPS is a protected, precise, and simple to use service that supplies an instant confirmation for each transaction. This service is provided free of charge from the U.S. Department of Treasury and permits employers to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. To find out more, employers can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment kind or to talk to a client service representative.

Remember, companies are eventually accountable for the payment of earnings tax kept and of both the company and staff member parts of social security and Medicare taxes.

Employers who believe that a costs or is a result of a problem with their payroll provider need to get in touch with the IRS as soon as possible by calling the number on the costs, writing to the IRS workplace that sent the costs, calling 800-829-4933 or going to a local IRS workplace. For more details about IRS notifications, bills and payment choices, refer to Publication 594, The IRS Collection Process PDF.