Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and related tax responsibilities to third-party payroll provider. Third-party payroll company can improve service operations and help satisfy filing deadlines and deposit requirements. Some of the services they offer are:

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

Employers who contract out some or all their payroll obligations ought to consider the following:

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Even though the company might forward the tax totals up 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 might examine charges and interest on the company’s account. The employer is responsible for all taxes, penalties and interest due. The company might likewise be held personally accountable for particular 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 suggests that the employer does not alter their address of record to that of the payroll provider as it may considerably restrict the company’s capability to be informed 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 should ensure their payroll providers are using EFTPS, so the employers can verify 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 occasionally verify payments. A warning must go up the very first time a service supplier misses 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 allows companies to make any additional tax payments that their third-party provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and business, who acting under the appearance of a company, have taken funds intended for payment of employment taxes.

EFTPS is a protected, accurate, and easy to use service that provides an instant confirmation for each deal. This service is offered complimentary of charge from the U.S. Department of Treasury and allows companies to make and validate federal tax payments electronically 24 hr a day, 7 days a week through the web or by phone. To learn more, employers can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment kind or to speak to a customer care agent.

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

Employers who believe that a bill or notice received is a result of an issue with their payroll provider should call the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent out the bill, calling 800-829-4933 or visiting a regional IRS workplace. For more details about IRS notifications, costs and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.