Outsourcing Payroll Duties

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

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

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

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

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Despite the fact that 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 stops working to make the federal tax payments, then the IRS might examine charges and interest on the employer’s account. The company is liable for all taxes, charges and interest due. The company might likewise 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 strongly suggests 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 business.
– Electronic Funds Transfer (EFT) need to be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll service providers are utilizing EFTPS, so the companies can verify 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 regularly validate payments. A warning should go up the very first time a company misses out on 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 been prosecutions of people and companies, who acting under the look of a payroll service provider, have actually taken funds intended for payment of work taxes.

EFTPS is a safe, accurate, and easy to utilize service that offers an instant confirmation for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For additional information, employers can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration type or to speak to a consumer service agent.

Remember, employers are ultimately accountable for the payment of income tax kept and of both the company and employee parts of social security and Medicare taxes.

Employers who think that a costs or notification received is an outcome of an issue with their payroll company must get in touch with the IRS as quickly as possible by calling the number on the expense, writing to the IRS office that sent out the expense, calling 800-829-4933 or going to a local IRS workplace. To find out more about IRS notices, costs and payment options, describe 594, The IRS Collection Process PDF.