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Outsourcing Payroll Duties

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

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

– Administering payroll and work taxes on behalf of the employer where the employer supplies 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 ought to consider the following:

– The company is ultimately 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 company is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS might evaluate penalties and interest on the company’s account. The employer is liable for all taxes, penalties and interest due. The company might likewise be held personally liable for certain unpaid 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 company does not alter their address of record to that of the payroll provider as it might considerably limit the company’s ability to be informed of tax matters including their company.
– Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll companies are using EFTPS, so the employers can verify that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to occasionally validate payments. A warning ought to increase the very first time a service company misses out on a payment or makes a late payment. When an employer 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 additional tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and companies, who acting under the look of a payroll provider, have taken funds meant for payment of work taxes.

EFTPS is a protected, precise, and easy to use service that supplies an immediate verification for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and allows companies to make and verify federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. To learn more, companies can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment type 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 portions of social security and Medicare taxes.

Employers who believe that an expense or notification received is a result of a problem with their payroll company need to get in touch with the IRS as quickly as possible by calling the number on the expense, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or visiting a local IRS workplace. For additional information about IRS notifications, costs and payment choices, describe Publication 594, The IRS Collection Process PDF.