Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and associated tax tasks to third-party payroll provider. Third-party payroll service suppliers can enhance business operations and help fulfill filing due dates and deposit requirements. A few of the services they provide are:

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

Employers who outsource some or all their payroll duties ought to 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 accountable party. If the third-party stops working to make the federal tax payments, then the IRS might assess penalties and interest on the company’s account. The company is accountable for all taxes, penalties and interest due. The company may likewise be held personally liable for particular unpaid federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly suggests that the company does not alter their address of record to that of the payroll service supplier as it might substantially limit the employer’s capability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll service providers are utilizing EFTPS, so the companies can verify that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and utilize this PIN to occasionally validate payments. A red flag should go up the first time a service company misses a payment or makes a late payment. When a company signs up on EFTPS they will have online 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 been prosecutions of individuals and business, who acting under the look of a payroll company, have actually taken funds meant for payment of work taxes.

EFTPS is a safe and secure, accurate, and simple to utilize service that provides an instant confirmation for each deal. This service is provided free of charge from the U.S. Department of Treasury and permits employers to make and validate federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. For more info, companies can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment form or to talk to a client service agent.

Remember, companies are ultimately responsible for the payment of earnings tax withheld and of both the employer and staff member parts of social security and Medicare taxes.

Employers who think that a costs or notification received is an outcome of a problem with their payroll service provider should get in touch with the IRS as soon as possible by calling the number on the expense, writing to the that sent the bill, calling 800-829-4933 or going to a local IRS office. For more information about IRS notifications, costs and payment options, refer to Publication 594, The IRS Collection Process PDF.