Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax duties to third-party payroll service companies. Third-party payroll company can streamline service operations and help meet filing due dates and deposit requirements. Some of the services they supply are:

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

Employers who outsource some or all their payroll responsibilities must think about the following:

– The employer is eventually accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company may forward the tax totals up to the third-party to make the tax deposits, the company is the responsible celebration. 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 company may also 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 company at the address of record. The IRS strongly recommends that the employer does not change their address of record to that of the payroll service company as it might substantially limit the employer’s capability to be informed of tax matters involving their company.
– Electronic Funds Transfer (EFT) should be utilized to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll companies are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and utilize this PIN to periodically validate payments. A warning ought to increase the very 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 enables companies to make any extra tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll service provider, have stolen funds planned for payment of work taxes.

EFTPS is a safe and secure, precise, and simple to use service that offers an instant verification for each deal. This service is used free of charge from the U.S. Department of Treasury and permits companies to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For more details, companies can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an or to speak with a consumer service agent.

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 an expense or notice received is an outcome of a problem with their payroll service company should call the IRS as quickly as possible by calling the number on the expense, composing to the IRS workplace that sent out the costs, calling 800-829-4933 or going to a local IRS office. To find out more about IRS notices, expenses and payment choices, describe Publication 594, The IRS Collection Process PDF.