Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and associated tax responsibilities to third-party payroll company. Third-party payroll service suppliers can enhance service operations and assist meet filing due dates and deposit requirements. Some 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 transferring work taxes with state and federal authorities.

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

– The employer is eventually responsible 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 responsible party. If the third-party fails to make the federal tax payments, then the IRS might evaluate penalties and interest on the employer’s account. The employer is accountable for all taxes, charges and interest due. The employer might also be held personally accountable for specific overdue federal 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 suggests that the employer does not change their address of record to that of the payroll service company as it might considerably limit the company’s ability to be notified of tax matters including their business.
– Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll service providers are using EFTPS, so the companies can verify 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 periodically verify payments. A warning must go up the very first time a company misses a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS allows companies to make any additional tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have been prosecutions of people and companies, who acting under the look of a payroll service company, have actually stolen funds intended for payment of employment taxes.

EFTPS is a secure, accurate, and simple to use service that provides an immediate confirmation for each transaction. This service is provided free of charge from the U.S. Department of Treasury and allows employers to make and tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. To find out more, companies can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration type or to consult with a consumer service agent.

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

Employers who think that a costs or notification gotten is an outcome of a problem with their payroll company should contact the IRS as quickly as possible by calling the number on the bill, composing to the IRS office that sent out the bill, calling 800-829-4933 or visiting a local IRS office. For more info about IRS notifications, bills and payment options, describe Publication 594, The IRS Collection Process PDF.