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Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll service companies can simplify organization operations and help meet filing deadlines and deposit requirements. Some of the services they supply are:

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

Employers who outsource some or all their payroll obligations need to consider the following:

– The employer is eventually accountable for the deposit and payment of federal tax liabilities. Although the company may forward the tax amounts to the third-party to make the tax deposits, the company is the responsible party. 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 responsible for all taxes, charges and interest due. The employer may also be held personally responsible for particular unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly recommends that the does not alter their address of record to that of the payroll provider as it may considerably restrict the company’s ability to be informed of tax matters involving their organization.
– Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll service providers are using EFTPS, so the companies can validate that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and use this PIN to regularly verify payments. A red flag must 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 online access to their payment history for 16 months. In addition, EFTPS allows companies to make any extra tax payments that their third-party service provider is not making on their behalf such as estimated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll provider, have stolen funds intended for payment of work taxes.

EFTPS is a secure, precise, and easy to use service that provides an instant verification for each deal. This service is used totally free of charge from the U.S. Department of Treasury and enables employers to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more information, companies can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment form or to consult with a client service representative.

Remember, employers are ultimately responsible for the payment of income tax withheld and of both the employer and staff member portions of social security and Medicare taxes.

Employers who think that a costs or notice gotten is a result of a problem with their payroll company must call the IRS as soon as possible by calling the number on the expense, composing to the IRS workplace that sent out the bill, calling 800-829-4933 or visiting a regional IRS workplace. To find out more about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.