Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax tasks to third-party payroll provider. Third-party payroll company can enhance service operations and assist satisfy filing due dates and deposit requirements. A few of the services they offer are:

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

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

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the company may forward the tax totals up to the third-party to make the tax deposits, the company is the responsible celebration. If the third-party fails to make the payments, then the IRS might examine charges and interest on the company’s account. The employer is liable for all taxes, charges and interest due. The employer might also be held personally accountable for certain overdue federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly recommends that the company does not alter their address of record to that of the payroll service company as it may substantially limit the employer’s ability to be notified of tax matters involving their business.
– Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll companies are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and utilize this PIN to regularly confirm payments. A warning ought to go up the very first time a service company misses out on a payment or makes a late payment. When an employer registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables employers to make any additional tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have actually been prosecutions of individuals and companies, who acting under the look of a payroll service supplier, have taken funds planned for payment of employment taxes.

EFTPS is a secure, accurate, and easy to utilize service that provides an instant verification for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and enables companies to make and verify federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. For additional information, employers can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment kind or to speak with a customer support representative.

Remember, employers are eventually responsible for the payment of earnings tax withheld and of both the employer and worker parts of social security and Medicare taxes.

Employers who think that a bill or notice gotten is an outcome of a problem with their payroll provider ought to contact the IRS as quickly as possible by calling the number on the costs, writing to the IRS office that sent the costs, calling 800-829-4933 or going to a regional IRS workplace. For more details about IRS notifications, expenses and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.