Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound organization practice, however … Know your tax duties as a company

Many companies outsource some or all their payroll and associated tax responsibilities to third-party payroll service companies. Third-party payroll company can enhance company operations and help fulfill filing deadlines and deposit requirements. A few of the services they supply are:

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

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

– The company is eventually responsible for the deposit and payment of federal tax liabilities. Although the company may forward the tax amounts 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 may examine charges and interest on the company’s account. The company is accountable for all taxes, charges and interest due. The employer may also be held personally accountable for specific unpaid federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS strongly suggests that the employer does not alter their address of record to that of the payroll company as it may significantly restrict the employer’s capability to be notified of tax matters involving their service.
– Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll providers are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and utilize this PIN to regularly confirm payments. A warning needs to go up the very first time a provider misses a payment or makes a late payment. When an employer signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the appearance of a payroll provider, have actually stolen funds intended for payment of work taxes.

EFTPS is a safe and secure, precise, and easy to use service that supplies an instant verification for each transaction. This service is offered totally free of charge from the U.S. Department of Treasury and allows employers to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. For additional information, companies can register online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment type or to speak with a customer support agent.

Remember, companies are eventually accountable for the payment of earnings tax kept and of both the employer and staff member parts of social security and Medicare taxes.

Employers who think that a bill or notice received is a result of an issue with their payroll company must contact the IRS as quickly as possible by calling the number on the bill, composing to the IRS office that sent out the expense, calling 800-829-4933 or going to a regional IRS workplace. For more details about IRS notifications, bills and payment choices, describe Publication 594, The IRS Collection Process PDF.