Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and associated tax tasks to third-party payroll company. Third-party payroll service providers can improve service operations and assist meet filing due dates and deposit requirements. A few of the services they provide 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 work taxes with state and federal authorities.

Employers who contract out some or all their payroll obligations ought to think about 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 company is the accountable party. If the third-party fails to make the federal tax payments, then the IRS might evaluate penalties and interest on the employer’s account. The company is liable for all taxes, charges and interest due. The company might also be held personally liable for specific unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS strongly recommends that the company does not alter their address of record to that of the payroll service provider as it might considerably restrict the company’s ability to be notified of tax matters including their business.
– Electronic Funds Transfer (EFT) need to be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll service providers are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and use this PIN to occasionally verify payments. A red flag must increase the first time a provider misses a payment or makes a late payment. When a company registers on EFTPS they will have on-line 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 individuals and business, who acting under the look of a payroll service provider, have stolen funds intended for payment of employment taxes.

EFTPS is a protected, accurate, and simple to utilize service that provides an immediate verification for each transaction. This service is provided complimentary of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For more information, companies can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to talk with a customer service representative.

Remember, companies are eventually accountable for the payment of earnings tax withheld and of both the employer and staff member portions of social security and Medicare taxes.

Employers who think that a bill or notice received is a result of an issue with their payroll provider must contact the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent out the expense, calling 800-829-4933 or visiting a local IRS office. To learn more about IRS notices, expenses and payment choices, describe Publication 594, The IRS Collection PDF.