Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll company can enhance company 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 company where the company offers the funds at first to the third-party.
– Reporting, gathering and transferring employment taxes with state and federal authorities.

Employers who contract out 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 employer might forward the tax totals up to the third-party to make the tax deposits, the employer is the . If the third-party stops working to make the federal tax payments, then the IRS may evaluate charges and interest on the company’s account. The company is responsible for all taxes, charges and interest due. The employer may also be held personally accountable for certain unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS strongly suggests that the company does not change their address of record to that of the payroll provider as it might substantially limit the company’s capability to be informed of tax matters including their service.
– Electronic Funds Transfer (EFT) must be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll suppliers are utilizing EFTPS, so the companies can verify that payments 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 periodically confirm payments. A warning ought to increase the very 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 enables employers to make any extra tax payments that their third-party service provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and business, who acting under the look of a payroll provider, have stolen funds meant for payment of employment taxes.

EFTPS is a safe, accurate, and simple to use service that provides an instant verification for each transaction. This service is offered complimentary of charge from the U.S. Department of Treasury and allows companies to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. To find out more, employers can enroll online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment kind or to consult with a customer support representative.

Remember, companies are eventually accountable for the payment of earnings tax withheld and of both the company and staff member parts of social security and Medicare taxes.

Employers who think that a bill or notice received is a result of an issue with their payroll company should contact the IRS as quickly as possible by calling the number on the expense, writing to the IRS workplace that sent the bill, calling 800-829-4933 or visiting a regional IRS office. To find out more about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.