Outsourcing Payroll Duties

Outsourcing payroll duties can be a sound business practice, however … Know your tax obligations as an employer

Many companies contract out some or all their payroll and associated tax tasks to third-party payroll company. company can streamline service operations and help fulfill filing deadlines and deposit requirements. Some of the services they supply are:

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

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

— The company is eventually accountable for the deposit and payment of federal tax liabilities. Although the employer may 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 may examine charges and interest on the company’s account. The employer is liable for all taxes, penalties and interest due. The company might likewise be held personally responsible for particular unpaid federal taxes.
— If there are any problems with an account, then the IRS will send correspondence to the employer at the address of record. The IRS highly recommends that the employer does not alter their address of record to that of the payroll service company as it may considerably restrict the employer’s ability to be informed of tax matters involving their business.
— Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll providers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers need to sign up on the EFTPS system to get their own PIN and use this PIN to occasionally validate payments. A red flag should go up 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 on-line access to their payment history for 16 months. In addition, EFTPS permits companies to make any extra tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of people and business, who acting under the appearance of a payroll service provider, have stolen funds planned for payment of employment taxes.

EFTPS is a protected, accurate, and easy to use service that supplies an immediate confirmation for each deal. This service is offered free of charge from the U.S. Department of Treasury and permits companies 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, companies can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration type or to speak to a client service representative.

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

Employers who believe that a costs or notice received is a result of a problem with their payroll service supplier should get in touch with the IRS as soon as possible by calling the number on the bill, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or visiting a regional IRS workplace. To learn more about IRS notifications, costs and payment options, refer to Publication 594, The IRS Collection Process PDF.