Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax duties to third-party payroll company. Third-party payroll service companies can streamline service operations and assist meet filing due dates and deposit requirements. Some of the services they provide are:

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

who contract out some or all their payroll responsibilities need to consider the following:

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Even though the company may forward the tax totals up 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 examine penalties and interest on the employer’s account. The employer is accountable for all taxes, charges and interest due. The company may also be held personally accountable for specific unsettled 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 highly recommends that the company does not alter their address of record to that of the payroll provider as it may substantially limit the employer’s ability to be informed of tax matters including their company.
– Electronic Funds Transfer (EFT) must be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll companies are using EFTPS, so the companies can verify that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and use this PIN to periodically confirm payments. A red flag ought to increase the very first time a company 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 actually been prosecutions of individuals and business, who acting under the look of a payroll service supplier, have taken funds planned for payment of employment taxes.

EFTPS is a protected, accurate, and simple to utilize service that offers an immediate confirmation for each deal. This service is provided complimentary of charge from the U.S. Department of Treasury and enables companies to make and validate federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For more info, companies can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration type or to talk with a customer care agent.

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

Employers who believe that an expense or notification gotten is an outcome of an issue with their payroll provider should get in touch with the IRS as soon as possible by calling the number on the costs, writing to the IRS workplace that sent out the expense, calling 800-829-4933 or going to a regional IRS office. For additional information about IRS notifications, bills and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.