Outsourcing Payroll Duties

Outsourcing payroll responsibilities can be a sound service practice, but … Know your tax obligations as an employer

Many employers contract out some or all their payroll and associated tax duties to third-party payroll provider. Third-party payroll company can simplify company operations and assist fulfill filing due dates and deposit requirements. Some of the services they supply are:

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

Employers who contract out some or all their payroll responsibilities must consider the following:

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the employer might forward the tax amounts 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 penalties and interest on the company’s account. The company is accountable for all taxes, penalties and interest due. The employer might likewise be held personally accountable for particular unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the employer at the address of record. The IRS strongly recommends that the company does not alter their address of record to that of the payroll provider as it may substantially limit the company’s capability to be notified of tax matters including 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 should guarantee their payroll suppliers are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and utilize this PIN to occasionally validate payments. A red flag needs to increase the first time a company misses a payment or makes a late payment. When an employer registers 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 supplier is not making on their behalf such as approximated tax . There have actually been prosecutions of people and business, who acting under the appearance of a payroll company, have taken funds meant for payment of work taxes.

EFTPS is a secure, accurate, and simple to utilize service that offers an instant verification for each deal. This service is used complimentary of charge from the U.S. Department of Treasury and permits companies to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. To learn more, companies can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment kind or to talk to a client service agent.

Remember, employers are ultimately responsible for the payment of income tax withheld and of both the company and staff member parts of social security and Medicare taxes.

Employers who think that a costs or notice received is a result of an issue with their payroll provider should get in touch with the IRS as soon as possible by calling the number on the bill, composing to the IRS workplace that sent out the bill, calling 800-829-4933 or visiting a regional IRS office. To learn more about IRS notifications, bills and payment options, describe Publication 594, The IRS Collection Process PDF.