Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll service suppliers can streamline business operations and help meet filing due dates 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, collecting and transferring work 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 ultimately responsible for the deposit and payment of federal tax liabilities. Although the company might forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS might assess penalties and interest on the employer’s account. The employer is responsible for all taxes, charges and interest due. The employer might likewise be held personally responsible for specific unpaid federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly recommends that the employer does not alter their address of record to that of the payroll company as it may significantly limit the employer’s capability to be notified of tax matters including their business.
– Electronic Funds Transfer (EFT) need to be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll service providers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and utilize this PIN to periodically confirm payments. A ought to go up the very first time a service company misses out on 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 allows companies to make any additional tax payments that their third-party provider is not making on their behalf such as estimated tax payments. There have been prosecutions of individuals and companies, who acting under the appearance of a payroll service company, have actually taken funds intended for payment of employment taxes.

EFTPS is a safe, precise, and easy to use service that supplies an immediate verification for each transaction. This service is provided free of charge from the U.S. Department of Treasury and permits companies to make and verify federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For additional information, companies can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration form or to consult with a customer support representative.

Remember, employers are ultimately accountable for the payment of income tax withheld and of both the company and worker portions of social security and Medicare taxes.

Employers who think that a costs or notification gotten is an outcome of a problem with their payroll service supplier need to call the IRS as quickly as possible by calling the number on the expense, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or going to a local IRS office. For additional information about IRS notifications, bills and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.