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Outsourcing Payroll Duties

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

Many employers 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 meet filing due dates and deposit requirements. Some of the services they offer are:

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

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

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Even though the company may forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable party. 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, penalties and interest due. The employer might likewise be held personally responsible for certain overdue federal taxes.
– If there are any issues with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly suggests that the employer does not alter their address of record to that of the payroll provider as it may significantly restrict the company’s ability to be notified of tax matters including their business.
– Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll providers are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and use this PIN to periodically verify payments. A red flag ought to go up the very first time a service company misses out on a payment or makes a late payment. When an employer registers 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 company is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll company, have stolen funds meant for payment of employment taxes.

EFTPS is a safe, precise, and simple to use service that offers an immediate verification for each transaction. This service is offered free of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For more details, employers can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment type or to talk with a client service agent.

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

Employers who think that an expense or notice gotten is a result of an issue with their payroll provider must contact the IRS as quickly as possible by calling the number on the costs, writing to the IRS office that sent out the costs, calling 800-829-4933 or visiting a local IRS office. For more information about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.