Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax duties to third-party payroll provider. Third-party payroll provider can streamline company operations and help satisfy filing due dates and deposit requirements. Some of the services they provide 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 transferring employment taxes with state and federal authorities.

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

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Although 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 responsible for all taxes, penalties and interest due. The employer might 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 suggests that the employer does not change their address of record to that of the payroll company as it may significantly limit the company’s ability to be notified of tax matters involving their service.
– Electronic Funds Transfer (EFT) need to be used to all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll suppliers are using EFTPS, so the employers can confirm that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and use this PIN to periodically validate payments. A warning ought to increase the very first time a service company misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any additional tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and companies, who acting under the look of a payroll company, have actually stolen funds meant for payment of employment taxes.

EFTPS is a protected, accurate, and simple to use service that offers an immediate confirmation for each deal. This service is provided totally free of charge from the U.S. Department of Treasury and allows employers to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. For additional information, employers can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration kind or to consult with a customer support representative.

Remember, companies are ultimately 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 believe that an expense or notice received is a result of a problem with their payroll company must get in touch with the IRS as soon as possible by calling the number on the expense, writing to the IRS office that sent out the expense, calling 800-829-4933 or checking out a regional IRS workplace. To learn more about IRS notifications, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.