Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll provider can streamline company operations and help satisfy 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 employer offers 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 obligations must think about the following:

– The employer is eventually accountable 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 company is the accountable celebration. If the third-party fails to make the tax payments, then the IRS might assess penalties and interest on the company’s account. The employer is responsible for all taxes, penalties and interest due. The company may also be held personally liable for specific unsettled 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 strongly recommends that the employer does not change their address of record to that of the payroll provider as it may substantially limit the employer’s capability to be informed of tax matters including their organization.
– 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 ensure their payroll providers are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and use this PIN to occasionally verify payments. A red flag must increase the very first time a service supplier misses a payment or makes a late payment. When a company 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 actually been prosecutions of people and companies, who acting under the appearance of a payroll provider, have actually stolen funds intended for payment of employment taxes.

EFTPS is a safe and secure, accurate, and easy to utilize service that supplies an immediate confirmation for each transaction. This service is provided complimentary of charge from the U.S. Department of Treasury and allows employers to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. To learn more, companies can register online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to consult with a client service agent.

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

Employers who think that a costs or notification gotten is a result of an issue with their payroll service supplier ought to contact the IRS as quickly as possible by calling the number on the expense, writing to the IRS office that sent out the costs, calling 800-829-4933 or checking out a regional IRS office. To learn more about IRS notifications, costs and payment choices, refer to Publication 594, The IRS Collection Process PDF.