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Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll company can simplify organization operations and help meet filing due dates and deposit requirements. Some of the services they provide are:

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

Employers who outsource some or all their payroll responsibilities ought to consider the following:

– The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the company may forward the tax totals up 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 assess penalties and interest on the company’s account. The employer is liable for all taxes, charges and interest due. The company may also be held personally accountable for specific overdue federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the employer at the address of record. The IRS highly recommends that the company does not change their address of record to that of the payroll provider as it might significantly restrict the employer’s ability to be notified of tax matters including their service.
– Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll service providers are using EFTPS, so the companies can verify that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and utilize this PIN to periodically verify payments. A red flag ought to increase the very first time a company 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 additional tax payments that their third-party service provider is not making on their behalf such as approximated tax payments. There have actually been of people and business, who acting under the look of a payroll service provider, have stolen funds meant for payment of employment taxes.

EFTPS is a safe and secure, accurate, and simple to utilize service that supplies an immediate verification for each transaction. This service is used free of charge from the U.S. Department of Treasury and permits companies to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. For additional information, companies can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration kind or to talk with a customer care agent.

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

Employers who think that a bill or notification gotten is a result of a problem with their payroll company ought to call the IRS as quickly as possible by calling the number on the bill, writing to the IRS office that sent the expense, calling 800-829-4933 or going to a regional IRS office. For more details about IRS notifications, costs and payment options, refer to Publication 594, The IRS Collection Process PDF.