Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax duties to third-party payroll service companies. Third-party payroll company can improve organization operations and help 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 offers the funds initially to the third-party.
— Reporting, collecting and transferring employment taxes with state and federal authorities.

Employers who outsource some or all their payroll obligations need to think about the following:

— The company is eventually responsible for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax amounts 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 might examine penalties and interest on the employer’s account. The employer is accountable for all taxes, charges and interest due. The company might also be held personally accountable for specific overdue federal taxes.
— If there are any problems with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS strongly recommends that the employer does not alter their address of record to that of the payroll provider as it may substantially limit the company’s ability to be informed of tax matters involving their business.
— Electronic Funds Transfer (EFT) need to be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll companies are using EFTPS, so the employers can validate that are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally verify payments. A red flag must 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 on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have been prosecutions of people and business, who acting under the appearance of a payroll company, have stolen funds meant for payment of employment taxes.

EFTPS is a protected, accurate, and easy to use service that offers an immediate verification for each transaction. This service is used complimentary of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more details, employers can register online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration form or to speak to a client service representative.

Remember, employers are ultimately responsible for the payment of earnings tax kept and of both the employer and staff member parts of social security and Medicare taxes.

Employers who think that an expense or notice gotten is an outcome of an issue with their payroll service company ought to contact the IRS as soon as possible by calling the number on the expense, composing 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 options, refer to Publication 594, The IRS Collection Process PDF.