Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax tasks to third-party payroll provider. Third-party payroll company can simplify company operations and assist meet filing due dates and deposit requirements. Some of the services they offer are:

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

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

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Although the company might forward the tax amounts to the third-party to make the tax deposits, the company is the responsible celebration. If the third-party stops working to make the federal tax payments, then the IRS may examine penalties and interest on the company’s account. The company is responsible for all taxes, penalties and interest due. The employer might likewise be held personally liable for particular unpaid federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS strongly recommends that the company does not alter their address of record to that of the payroll provider as it might significantly restrict the company’s ability to be notified of tax matters involving their organization.
– Electronic Funds Transfer (EFT) should be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll service providers are using EFTPS, so the companies can verify that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and utilize this PIN to periodically verify payments. A warning needs to increase the first time a company misses out on a payment or makes a late payment. When an employer signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS permits companies to make any extra tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll provider, have actually taken funds meant for payment of work taxes.

EFTPS is a secure, accurate, and simple to use service that provides an instant confirmation for each deal. This service is used free of charge from the U.S. Department of Treasury and allows companies to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the web or by phone. To learn more, employers can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment form or to talk to a client service representative.

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

Employers who think that a costs or notice received is an outcome of a problem with their payroll provider should call the IRS as quickly as possible by calling the number on the expense, composing to the IRS office that sent the expense, calling 800-829-4933 or visiting a regional IRS office. For more information about IRS notifications, bills and payment options, refer to Publication 594, The IRS Collection .