Outsourcing Payroll Duties

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

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

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

Employers who outsource some or all their payroll responsibilities must think about the following:

– The company is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the employer may 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 evaluate charges and interest on the employer’s account. The employer is accountable for all taxes, penalties and interest due. The company might also be held personally responsible for certain taxes.
– If there are any problems 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 change their address of record to that of the payroll service company as it might considerably restrict the company’s capability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll suppliers are using EFTPS, so the employers can verify that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and utilize this PIN to periodically validate payments. A warning should increase the very first time a service provider misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of people and companies, who acting under the look of a payroll company, have taken funds planned for payment of work taxes.

EFTPS is a safe and secure, accurate, and simple to utilize service that provides an instant verification for each transaction. This service is offered complimentary of charge from the U.S. Department of Treasury and permits employers to make and validate federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. To find out more, companies can enroll online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration form or to talk to a client service representative.

Remember, employers are ultimately responsible for the payment of income tax withheld and of both the employer and staff member parts of social security and Medicare taxes.

Employers who think that an expense or notice received is a result of a problem with their payroll provider must get in touch with the IRS as soon as possible by calling the number on the expense, writing to the IRS office that sent out the expense, calling 800-829-4933 or going to a regional IRS workplace. To find out more about IRS notifications, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.