Outsourcing Payroll Duties

Outsourcing payroll duties can be a sound service practice, but … 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 provider can improve organization operations and assist fulfill filing deadlines and deposit requirements. Some of the services they offer are:

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

Employers who contract out some or all their payroll obligations must think about the following:

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Even though the company might forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable party. If the third-party fails to make the federal tax payments, then the IRS might assess charges and interest on the company’s account. The company is liable for all taxes, charges and interest due. The employer might likewise be held personally accountable for specific unsettled federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the employer at the address of record. The IRS highly recommends that the company does not alter their address of record to that of the payroll company as it may significantly restrict the company’s capability to be notified of tax matters including their service.
– 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 need to guarantee their payroll companies are using EFTPS, so the can verify that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and use this PIN to regularly confirm payments. A red flag should go up the very first time a provider 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 companies to make any extra tax payments that their third-party provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and companies, who acting under the look of a payroll provider, have taken funds planned for payment of employment taxes.

EFTPS is a protected, precise, and easy to use service that provides an instant verification for each deal. This service is offered free of charge from the U.S. Department of Treasury and allows companies to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For additional information, employers can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment form or to speak to a customer care representative.

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

Employers who think that a costs or notice gotten is an outcome of an issue with their payroll provider need to contact the IRS as quickly as possible by calling the number on the expense, writing to the IRS workplace that sent the expense, calling 800-829-4933 or checking out a regional IRS office. For additional information about IRS notices, bills and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.