Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll service companies can enhance organization operations and help fulfill filing deadlines and deposit requirements. A few of the services they supply are:

– Administering payroll and work taxes on behalf of the employer where the company offers 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 should think about the following:

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Although the company might forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible celebration. If the third-party stops working to make the federal tax payments, then the IRS may assess penalties and interest on the company’s account. The company is liable for all taxes, penalties and interest due. The company may also be held personally responsible for certain unpaid federal taxes.
– If there are any problems with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly recommends that the employer does not alter their address of record to that of the payroll service supplier as it may substantially restrict the company’s capability to be informed of tax matters involving their company.
– 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 providers are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and use this PIN to periodically validate payments. A must go up the very first time a service company misses a payment or makes a late payment. When an employer signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of people and business, who acting under the look of a payroll company, have actually taken funds meant for payment of work taxes.

EFTPS is a protected, precise, and simple to utilize service that provides an instant confirmation for each transaction. This service is offered complimentary of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. To learn more, employers can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to speak to a client service agent.

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

Employers who think that an expense or notice gotten is a result of an issue with their payroll company ought to contact the IRS as soon as possible by calling the number on the costs, composing to the IRS workplace that sent the bill, calling 800-829-4933 or checking out a local IRS office. For more info about IRS notifications, costs and payment alternatives, describe Publication 594, The IRS Collection Process PDF.