Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax duties to third-party payroll company. Third-party payroll service providers can improve service operations and assist satisfy 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 company supplies the funds initially to the third-party.
– Reporting, gathering and transferring employment taxes with state and federal authorities.

Employers who outsource some or all their payroll obligations need to think about the following:

– The employer is eventually accountable for the deposit and payment of federal tax liabilities. Although the employer might forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS may evaluate penalties and interest on the employer’s account. The company is liable for all taxes, penalties and interest due. The company might likewise be held personally accountable for particular taxes.
– If there are any concerns with an account, then the IRS will send 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 significantly restrict the employer’s ability to be informed of tax matters including their service.
– 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 should guarantee their payroll providers are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and use this PIN to periodically verify payments. A warning should go up the very first time a provider misses out on a payment or makes a late payment. When an employer registers on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS allows companies to make any extra tax payments that their third-party service provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the look of a payroll service supplier, have actually taken funds intended for payment of employment taxes.

EFTPS is a safe and secure, accurate, and easy to utilize service that provides an instant confirmation for each transaction. This service is provided complimentary of charge from the U.S. Department of Treasury and permits companies to make and verify 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 kind or to consult with a client service representative.

Remember, employers are eventually accountable for the payment of income tax kept and of both the company and staff member portions of social security and Medicare taxes.

Employers who think that an expense or notice gotten is an outcome of an issue with their payroll provider must get in touch with the IRS as quickly as possible by calling the number on the expense, composing to the IRS workplace that sent out the bill, calling 800-829-4933 or visiting a local IRS office. To find out more about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.