Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax tasks to third-party payroll provider. Third-party payroll company can improve business operations and help satisfy filing due dates and deposit requirements. Some of the services they offer are:

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

Employers who contract out some or all their payroll obligations ought to consider the following:

– The company is eventually responsible for the deposit and payment of federal tax liabilities. Even though the company may forward the tax amounts 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 might examine charges and interest on the company’s account. The employer is liable for all taxes, penalties and interest due. The employer may also be held personally accountable for particular overdue federal taxes.
– If there are any problems with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly suggests that the company does not change their address of record to that of the payroll provider as it might significantly limit the company’s ability to be notified of tax matters including their company.
– Electronic Funds Transfer (EFT) must be utilized to transfer 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 need to sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally validate payments. A red flag ought to increase the very first time a provider misses 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 employers to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and business, who acting under the appearance of a payroll service company, have stolen funds meant for payment of work taxes.

EFTPS is a secure, accurate, and simple to utilize service that an instant confirmation for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and permits companies to make and verify federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. For more details, employers can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to speak to a client service representative.

Remember, companies are ultimately responsible for the payment of earnings tax kept and of both the company and employee portions of social security and Medicare taxes.

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