Outsourcing Payroll Duties

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

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

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

Employers who outsource some or all their payroll obligations should consider the following:

– The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Although the employer might 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 may evaluate charges and interest on the employer’s account. The company is responsible for all taxes, charges and interest due. The company might also be held personally responsible for particular overdue 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 company as it may substantially restrict the company’s ability to be informed of tax matters involving their company.
– Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll companies are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and utilize this PIN to periodically verify payments. A warning 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 enables 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 individuals and business, who acting under the look of a payroll provider, have taken funds meant for of work taxes.

EFTPS is a safe and secure, accurate, and simple to use service that offers an instant confirmation for each deal. This service is offered free of charge from the U.S. Department of Treasury and enables employers to make and confirm federal tax payments electronically 24 hr a day, 7 days a week through the web or by phone. To find out more, companies can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment kind or to consult with a customer support agent.

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

Employers who believe that a costs or notification gotten is an outcome of a problem with their payroll service company should contact the IRS as soon as possible by calling the number on the expense, writing to the IRS office that sent out the bill, calling 800-829-4933 or checking out a local IRS workplace. For additional information about IRS notifications, expenses and payment choices, refer to Publication 594, The IRS Collection Process PDF.