Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll company can simplify service operations and assist fulfill filing deadlines and deposit requirements. Some of the services they provide are:

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

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

– The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though the company might forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible party. If the third-party fails to make the federal tax payments, then the IRS may evaluate penalties and interest on the company’s account. The company is responsible for all taxes, penalties and interest due. The company might likewise be held personally liable for specific 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 strongly recommends that the employer does not alter their address of record to that of the payroll service supplier as it may significantly restrict the company’s ability to be notified of tax matters including their service.
– Electronic Funds Transfer (EFT) must be used to transfer all federal tax . Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll service providers are using EFTPS, so the companies 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 utilize this PIN to regularly verify payments. A warning ought to go up the very first time a company misses out on 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 extra tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have been prosecutions of people and business, who acting under the appearance of a payroll service supplier, have actually taken funds intended for payment of work taxes.

EFTPS is a safe, accurate, and simple to utilize service that supplies an immediate verification for each transaction. This service is used free of charge from the U.S. Department of Treasury and permits employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more information, employers can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration form or to speak to a client service agent.

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

Employers who think that a costs or notice gotten is an outcome of an issue with their payroll service provider need to contact the IRS as soon as possible by calling the number on the costs, composing to the IRS workplace that sent the expense, calling 800-829-4933 or visiting a local IRS workplace. For more details about IRS notifications, expenses and payment choices, refer to Publication 594, The IRS Collection Process PDF.