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Outsourcing Payroll Duties

Outsourcing payroll responsibilities can be a sound business practice, but … Know your tax responsibilities as a company

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

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

Employers who outsource some or all their payroll duties ought to think about the following:

– The company is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax totals up 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 employer is liable for all taxes, charges and interest due. The employer might likewise be held personally liable for particular unpaid federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly recommends that the company does not alter their address of record to that of the payroll company as it may substantially restrict the company’s ability to be notified of tax matters including their company.
– 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 companies are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers need to sign up on the EFTPS system to get their own PIN and use this PIN to occasionally verify payments. A red flag needs to increase the very first time a company misses out on a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their history for 16 months. In addition, EFTPS permits 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 actually been prosecutions of people and business, who acting under the look of a payroll provider, have actually taken funds intended for payment of employment taxes.

EFTPS is a safe, accurate, and easy to use service that provides an immediate verification for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and allows employers to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. For more information, employers can register online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment kind or to talk to a customer support agent.

Remember, companies are eventually accountable for the payment of income tax withheld and of both the employer and worker 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 service supplier need to contact the IRS as quickly as possible by calling the number on the bill, composing to the IRS office that sent the bill, calling 800-829-4933 or going to a regional IRS workplace. For more details about IRS notifications, expenses and payment choices, refer to Publication 594, The IRS Collection Process PDF.