Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll company can streamline business operations and help fulfill filing deadlines and deposit requirements. Some of the services they are:

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

Employers who contract out some or all their payroll duties should consider the following:

– The company is eventually responsible for the deposit and payment of federal tax liabilities. Despite the fact that the employer might forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS may examine penalties and interest on the company’s account. The employer is accountable for all taxes, charges and interest due. The company might likewise be held personally responsible for specific unpaid federal taxes.
– If there are any issues with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly suggests that the company does not alter their address of record to that of the payroll service supplier as it may significantly restrict the company’s capability to be notified of tax matters involving their company.
– Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll suppliers are using EFTPS, so the companies can verify that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to regularly verify payments. A red flag must go up the first time a company 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 enables companies to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have been prosecutions of people and companies, who acting under the look of a payroll company, have stolen funds meant for payment of work taxes.

EFTPS is a protected, precise, and simple to utilize service that provides an instant confirmation for each deal. This service is offered complimentary of charge from the U.S. Department of Treasury and enables employers to make and verify federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. For additional information, companies can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration type or to speak to a customer care agent.

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

Employers who believe that a bill or notice received is a result of an issue with their payroll service provider need to get in touch with the IRS as quickly as possible by calling the number on the bill, writing to the IRS workplace that sent the bill, calling 800-829-4933 or checking out a regional IRS workplace. To find out more about IRS notifications, bills and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.