Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax duties to third-party payroll provider. Third-party payroll service providers can simplify organization operations and help satisfy filing due dates and deposit requirements. A few of the services they offer are:

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

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

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable party. 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 employer is responsible for all taxes, penalties and interest due. The employer may also be held personally responsible for specific unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly suggests that the employer does not change their address of record to that of the payroll company as it might considerably limit the company’s ability to be informed of tax matters involving their company.
– Electronic Funds Transfer (EFT) need to be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll suppliers are utilizing EFTPS, so the employers can validate that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and use this PIN to regularly verify payments. A red flag should increase 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 allows employers to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and business, who acting under the look of a payroll company, have taken funds intended for payment of employment taxes.

EFTPS is a protected, precise, and easy to use service that supplies an instant verification 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 digitally 24 hours a day, 7 days a week through the web or by phone. For more information, employers can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment form or to with a client service agent.

Remember, employers are ultimately accountable for the payment of earnings tax kept and of both the company and staff member portions of social security and Medicare taxes.

Employers who believe that a costs or notice gotten is an outcome of a problem with their payroll service provider ought to get in touch with the IRS as soon as possible by calling the number on the costs, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or checking out a local IRS workplace. To learn more about IRS notifications, bills and payment options, describe Publication 594, The IRS Collection Process PDF.