Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax responsibilities to third-party payroll service providers. Third-party payroll company can streamline business operations and assist meet 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 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 responsibilities ought to consider the following:

– The company is eventually responsible for the deposit and payment of federal tax liabilities. Despite the fact that the employer may forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS might examine penalties and interest on the employer’s account. The company is responsible for all taxes, charges and interest due. The employer may likewise be held personally liable for certain overdue 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 recommends that the company does not change their address of record to that of the payroll company as it may substantially limit the employer’s capability to be informed of tax matters including their organization.
– Electronic Funds Transfer (EFT) must be utilized to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll service providers are using EFTPS, so the employers can confirm that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and use this PIN to payments. A red flag should increase the very first time a service supplier 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 employers to make any additional tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and companies, who acting under the appearance of a payroll service supplier, have actually taken funds planned for payment of employment taxes.

EFTPS is a protected, accurate, and simple to use service that provides an immediate verification for each transaction. This service is used complimentary of charge from the U.S. Department of Treasury and enables employers to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. For more details, employers can register online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration form or to talk with a client service representative.

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

Employers who believe that a bill or notification received is a result of an issue with their payroll service supplier should get in touch with the IRS as quickly as possible by calling the number on the costs, writing to the IRS workplace that sent out the bill, calling 800-829-4933 or visiting a local IRS workplace. To learn more about IRS notices, expenses and payment options, refer to Publication 594, The IRS Collection Process PDF.