Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and associated tax tasks to third-party payroll provider. Third-party payroll service suppliers can streamline business operations and help satisfy filing deadlines and deposit requirements. Some of the services they supply are:

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

Employers who outsource some or all their payroll responsibilities need to consider the following:

– The company is eventually accountable 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 accountable celebration. If the third-party fails to make the federal tax payments, then the IRS may examine charges and interest on the employer’s account. The company is responsible for all taxes, charges and interest due. The company might also be held personally liable for certain unsettled federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the company 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 provider as it may substantially limit the company’s ability to be informed of tax matters involving their service.
– Electronic Funds Transfer (EFT) should be utilized to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll providers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and utilize this PIN to periodically validate payments. A warning ought to go up the very first time a company misses out on 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 permits employers to make any additional tax payments that their third-party service provider is not making on their behalf such as estimated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll company, have actually taken funds meant for payment of employment taxes.

EFTPS is a protected, precise, and simple to use service that provides an immediate verification for each transaction. This service is used free of charge from the U.S. Department of Treasury and permits companies to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. To find out more, companies can register online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment kind or to speak with a customer care agent.

Remember, companies are ultimately accountable for the payment of income tax kept and of both the employer and worker parts of social security and Medicare taxes.

who think that a bill or notification gotten is an outcome of a problem with their payroll provider must call the IRS as soon as possible by calling the number on the expense, composing to the IRS office that sent the expense, calling 800-829-4933 or going to a local IRS office. To learn more about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.