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Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll provider can simplify company operations and help satisfy filing due dates and deposit requirements. Some 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, gathering and transferring work taxes with state and federal authorities.

Employers who outsource some or all their payroll duties ought to think about the following:

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax totals up 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 assess charges and interest on the employer’s account. The company is accountable for all taxes, charges and interest due. The employer may also be held personally accountable for specific overdue 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 provider as it may considerably restrict the company’s capability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) need to be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll providers are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to occasionally confirm payments. A red flag needs to increase the first time a service company misses 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 allows companies to make any additional tax payments that their third-party service provider is not making on their behalf such as estimated tax payments. There have been prosecutions of individuals and companies, who acting under the appearance of a payroll service provider, have actually taken funds intended for payment of work taxes.

EFTPS is a safe and secure, precise, and simple to use service that provides an instant confirmation for each deal. This service is provided free of charge from the U.S. Department of Treasury and allows companies to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more details, employers can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment type or to consult with a customer support agent.

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

Employers who believe that a costs or notification gotten is an outcome of a problem with their payroll company should call the IRS as soon as possible by calling the number on the costs, to the IRS workplace that sent out the costs, calling 800-829-4933 or checking out a local IRS workplace. For additional information about IRS notices, expenses and payment alternatives, describe Publication 594, The IRS Collection Process PDF.