Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll provider can streamline company operations and help satisfy filing deadlines and deposit requirements. A few of the services they supply are:

– Administering payroll and work taxes on behalf of the employer where the employer provides the funds initially to the third-party.
– Reporting, gathering and depositing work taxes with state and federal authorities.

Employers who contract out some or all their payroll duties need to consider the following:

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the employer might forward the tax totals up to the 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 may evaluate penalties and interest on the company’s account. The employer is liable for all taxes, penalties and interest due. The company 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 provider as it might significantly limit the company’s ability to be informed of tax matters including their service.
– 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 need to guarantee their payroll service providers are using EFTPS, so the employers can confirm that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and use this PIN to occasionally verify payments. A warning must go up the very first time a company misses a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows companies to make any extra tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and business, who acting under the look of a payroll service company, have actually taken funds planned for payment of work taxes.

EFTPS is a protected, precise, and easy to use service that provides an immediate verification for each transaction. This service is used totally free of charge from the U.S. Department of Treasury and permits companies to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. For more details, employers can enroll online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration kind or to talk to a customer care agent.

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

Employers who believe that a costs or notification gotten is a result of a problem with their payroll provider need to contact the IRS as soon as possible by calling the number on the bill, writing to the IRS office that sent the bill, calling 800-829-4933 or going to a regional IRS office. To learn more about IRS notifications, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.