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Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax responsibilities to third-party payroll service suppliers. Third-party payroll company can improve company operations and assist satisfy filing deadlines and deposit requirements. Some of the services they provide are:

– Administering payroll and employment taxes on behalf of the employer where the employer provides the funds at first 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 should think about the following:

– The employer is eventually accountable for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible party. If the third-party stops working to make the federal tax payments, then the IRS might examine charges and interest on the employer’s account. The company is responsible for all taxes, charges and interest due. The employer may likewise be held personally accountable for specific unpaid federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the company at the address of record. The IRS strongly recommends that the employer does not alter their address of record to that of the payroll service provider as it might significantly restrict the employer’s ability to be notified of tax matters involving their service.
– 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 need to ensure their payroll providers are utilizing EFTPS, so the companies can verify that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and this PIN to regularly confirm payments. A warning must increase 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 permits 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 companies, who acting under the appearance of a payroll provider, have taken funds intended for payment of employment taxes.

EFTPS is a safe, precise, and simple to use service that offers an instant confirmation for each deal. This service is offered complimentary of charge from the U.S. Department of Treasury and permits companies to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For additional information, companies can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration type or to talk to a customer support agent.

Remember, companies are ultimately accountable for the payment of earnings tax kept and of both the company and worker portions of social security and Medicare taxes.

Employers who believe that a bill or notification received is a result of a problem with their payroll company ought to call the IRS as soon as possible by calling the number on the bill, writing to the IRS office that sent the expense, calling 800-829-4933 or checking out a regional IRS workplace. For more info about IRS notices, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.