Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and associated tax duties to third-party payroll company. Third-party payroll company can improve company operations and assist fulfill filing due dates and deposit requirements. A few of the services they supply are:

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

Employers who contract out some or all their payroll responsibilities must consider the following:

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax amounts to the third-party to make the tax deposits, the company is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS might evaluate charges and interest on the company’s account. The company is accountable for all taxes, charges and interest due. The company may also be held personally responsible for specific overdue federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly recommends that the employer does not alter their address of record to that of the payroll company as it may substantially restrict the employer’s ability to be informed of tax matters involving their company.
– Electronic Funds Transfer (EFT) need to be utilized to all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll suppliers are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and use this PIN to regularly confirm payments. A red flag should increase the first time a service supplier misses a payment or makes a late payment. When an employer signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits employers to make any additional 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 business, who acting under the look of a payroll service supplier, have actually stolen funds meant for payment of work taxes.

EFTPS is a safe and secure, accurate, and simple to utilize 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 employers to make and verify federal tax payments digitally 24 hr 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 an enrollment type or to talk to a client service agent.

Remember, employers are eventually responsible for the payment of earnings tax kept and of both the employer and staff member portions of social security and Medicare taxes.

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