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Outsourcing Payroll Duties

Outsourcing payroll duties can be a sound company 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 company. Third-party payroll provider can streamline company operations and help fulfill filing deadlines and deposit requirements. Some of the services they supply are:

– Administering payroll and work taxes on behalf of the company where the employer provides 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 obligations need to think about the following:

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Even though the company may forward the tax amounts 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 may assess charges and interest on the company’s account. The employer is liable for all taxes, charges and interest due. The employer might also be held personally responsible for particular overdue federal taxes.
– If there are any problems with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly recommends that the employer does not alter their address of record to that of the payroll company as it might significantly restrict the employer’s capability to be notified of tax matters including their company.
– Electronic Funds Transfer (EFT) need to be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll suppliers are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and use this PIN to regularly validate payments. A red flag must go up the first time a provider misses a payment or makes a late payment. When a company registers on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits employers to make any extra 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 companies, who acting under the appearance of a payroll company, have stolen funds for payment of employment taxes.

EFTPS is a safe, precise, and simple to use service that offers an immediate confirmation for each deal. This service is provided totally free of charge from the U.S. Department of Treasury and allows employers to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. For more details, employers can register online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to speak with a customer support agent.

Remember, employers are ultimately accountable for the payment of earnings tax withheld 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 an issue with their payroll company must contact the IRS as soon as possible by calling the number on the costs, writing to the IRS office that sent out the costs, calling 800-829-4933 or going to a regional IRS office. To learn more about IRS notices, bills and payment options, describe Publication 594, The IRS Collection Process PDF.