Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll service providers can improve service operations and help fulfill filing deadlines and deposit requirements. Some of the services they supply are:

– Administering payroll and work taxes on behalf of the employer where the company offers the funds at first to the third-party.
– Reporting, collecting and transferring work taxes with state and federal authorities.

Employers who contract out some or all their payroll responsibilities should consider the following:

– The company is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company may forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible party. If the third-party fails to make the federal tax payments, then the IRS may evaluate charges and interest on the company’s account. The company is responsible for all taxes, charges and interest due. The employer may likewise be held personally accountable for specific unsettled federal taxes.
– If there are any issues 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 change their address of record to that of the payroll company as it might substantially limit the company’s capability to be notified of tax matters involving their organization.
– Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll providers are using EFTPS, so the employers can verify that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and utilize this PIN to regularly verify payments. A red flag needs to increase the very first time a company misses out on 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 enables companies to make any extra tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have been prosecutions of individuals and companies, who acting under the look of a payroll service supplier, have actually taken funds planned for payment of work taxes.

EFTPS is a safe and secure, accurate, and simple to use service that offers an immediate confirmation for each transaction. This service is used free of charge from the U.S. Department of Treasury and allows employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. To learn more, employers can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment type or to talk with a client service representative.

Remember, companies are responsible 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 a costs or notice received is a result of a problem with their payroll service supplier need to contact the IRS as soon as possible by calling the number on the costs, writing to the IRS office that sent the expense, calling 800-829-4933 or visiting a regional IRS workplace. For more details about IRS notifications, bills and payment options, describe Publication 594, The IRS Collection Process PDF.