Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax duties to third-party payroll service companies. Third-party payroll company can enhance company operations and help fulfill filing deadlines and deposit requirements. Some of the services they supply are:

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

Employers who outsource some or all their payroll duties ought to consider the following:

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Although the company may forward the tax amounts to the third-party to make the tax deposits, the company is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS may examine penalties and interest on the employer’s account. The company is responsible for all taxes, charges and interest due. The employer might also be held personally liable for certain unsettled federal taxes.
– If there are any problems with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly suggests that the company does not change their address of record to that of the payroll company as it might substantially restrict the company’s capability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll providers are using EFTPS, so the employers can verify that payments are being made on their behalf. Employers need to sign up on the EFTPS system to get their own PIN and use this PIN to periodically confirm payments. A warning must increase the first time a provider misses out on 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 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 been prosecutions of individuals and companies, who acting under the look of a payroll service supplier, have actually stolen funds planned for payment of employment taxes.

EFTPS is a safe, precise, and simple to utilize service that provides an instant confirmation for each transaction. This service is used totally free of charge from the U.S. Department of Treasury and permits employers to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. To learn more, employers can enroll online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration form or to consult with a customer care representative.

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

Employers who think that a bill or notification gotten is a result of a problem with their must contact the IRS as soon as possible by calling the number on the bill, writing to the IRS workplace that sent the bill, calling 800-829-4933 or visiting a local IRS office. For more details about IRS notices, expenses and payment choices, describe Publication 594, The IRS Collection Process PDF.