Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and associated tax tasks to third-party payroll service providers. Third-party payroll provider can improve organization and assist meet filing deadlines and deposit requirements. Some of the services they supply are:

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

Employers who contract out some or all their payroll duties ought to consider the following:

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible celebration. If the third-party fails to make the federal tax payments, then the IRS may evaluate charges and interest on the company’s account. The employer is accountable for all taxes, penalties and interest due. The company might also be held personally liable for specific overdue federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the company at the address of record. The IRS strongly suggests that the company does not alter their address of record to that of the payroll provider as it may considerably limit the company’s ability to be informed of tax matters involving their organization.
– 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 must guarantee their payroll providers are using EFTPS, so the companies can verify that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and utilize this PIN to occasionally confirm payments. A red flag needs to go up the very first time a provider misses a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS permits 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 appearance of a payroll company, have stolen funds meant for payment of employment taxes.

EFTPS is a safe and secure, precise, and simple to use service that offers an instant confirmation for each deal. This service is offered complimentary of charge from the U.S. Department of Treasury and enables companies to make and validate federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. To learn more, companies can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration kind or to talk to a client service agent.

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

Employers who think that a costs or notification gotten is a result of an issue with their payroll company need to contact the IRS as soon as possible by calling the number on the costs, writing to the IRS workplace that sent the bill, calling 800-829-4933 or checking out a regional IRS office. For more details about IRS notices, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.