Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and associated to third-party payroll company. Third-party payroll company can enhance service operations and help satisfy filing deadlines and deposit requirements. Some of the services they offer are:

– Administering payroll and employment taxes on behalf of the company where the company supplies the funds initially to the third-party.
– Reporting, collecting and transferring 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 accountable for the deposit and payment of federal tax liabilities. Although the employer may forward the tax amounts to the third-party to make the tax deposits, the company is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS might assess charges and interest on the employer’s account. The employer is accountable for all taxes, charges and interest due. The employer might likewise be held personally liable for specific unpaid federal taxes.
– If there are any issues with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly suggests that the company does not alter their address of record to that of the payroll provider as it might significantly limit the employer’s capability to be informed of tax matters involving their organization.
– Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll providers are using EFTPS, so the companies can validate 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 periodically confirm payments. A red flag must increase the very first time a provider misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party provider is not making on their behalf such as estimated tax payments. There have been prosecutions of individuals and companies, who acting under the appearance of a payroll company, have actually taken funds planned for payment of employment taxes.

EFTPS is a protected, precise, and easy to utilize service that offers an instant verification for each deal. This service is offered free of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For additional information, employers can enroll online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration form or to talk with a client service agent.

Remember, companies are ultimately accountable for the payment of income tax kept and of both the employer and staff member portions of social security and Medicare taxes.

Employers who think that a bill or notification received is a result of an issue with their payroll provider must get in touch with the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent the costs, calling 800-829-4933 or checking out a regional IRS workplace. To learn more about IRS notifications, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.