Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound service practice, but … Know your tax obligations as a company

Many employers outsource some or all their payroll and related tax duties to third-party payroll provider. Third-party payroll provider can enhance service operations and assist satisfy filing deadlines and deposit requirements. A few of the services they provide are:

– Administering payroll and employment 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 responsibilities need to consider the following:

– The employer is ultimately accountable for the deposit and payment of federal tax . Although 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 stops working to make the federal tax payments, then the IRS may evaluate penalties and interest on the company’s account. The company is liable for all taxes, penalties and interest due. The company may likewise be held personally responsible for specific unsettled 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 recommends that the company does not alter their address of record to that of the payroll company as it may considerably restrict the employer’s capability to be informed of tax matters involving their organization.
– Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll providers are using EFTPS, so the employers can verify that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to periodically validate payments. A red flag should 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 online access to their payment history for 16 months. In addition, EFTPS permits 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 actually been prosecutions of individuals and business, who acting under the look of a payroll provider, have actually taken funds intended for payment of employment taxes.

EFTPS is a protected, precise, and easy 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 enables employers to make and confirm 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 Customer support at 800-555-4477 for a registration form or to talk with a consumer service representative.

Remember, employers are ultimately responsible 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 a bill or notice gotten is an outcome of a problem with their payroll service company ought to call the IRS as soon as possible by calling the number on the bill, composing to the IRS office that sent the bill, calling 800-829-4933 or visiting a local IRS workplace. To find out more about IRS notices, expenses and payment choices, refer to Publication 594, The IRS Collection Process PDF.