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Outsourcing Payroll Duties

tasks can be a sound business practice, however … Know your tax responsibilities as a company

Many companies contract out some or all their payroll and associated tax responsibilities to third-party payroll service companies. Third-party payroll company can simplify service operations and assist fulfill filing due dates and deposit requirements. A few of the services they supply are:

– Administering payroll and employment taxes on behalf of the employer where the employer offers the funds initially to the third-party.
– Reporting, collecting and depositing work taxes with state and federal authorities.

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

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Although the company might forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS may assess charges and interest on the employer’s account. The company is liable for all taxes, penalties and interest due. The company might likewise be held personally accountable for certain overdue federal taxes.
– If there are any issues with an account, then the IRS will send correspondence to the employer at the address of record. The IRS strongly suggests that the company does not alter their address of record to that of the payroll provider as it might significantly limit the employer’s capability to be notified of tax matters involving their service.
– Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll service providers are utilizing EFTPS, so the employers can validate that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and utilize this PIN to occasionally validate payments. A warning needs to go up the first time a provider misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables employers to make any extra tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have actually been prosecutions of people and companies, who acting under the look of a payroll company, have actually stolen funds intended for payment of employment taxes.

EFTPS is a safe, precise, and simple to utilize service that supplies an immediate confirmation for each deal. This service is provided free of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more details, companies can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment form or to talk to a client service agent.

Remember, companies are ultimately accountable for the payment of earnings tax kept 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 company ought to call the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent the expense, calling 800-829-4933 or visiting a local IRS office. For additional information about IRS notifications, costs and payment choices, describe Publication 594, The IRS Collection Process PDF.