Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax duties to third-party payroll company. Third-party payroll service providers can streamline service operations and assist satisfy filing deadlines and deposit requirements. Some of the services they offer are:

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

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

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the employer might forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS might examine penalties and interest on the employer’s account. The company is accountable for all taxes, charges and interest due. The employer might likewise be held personally liable for specific overdue 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 strongly recommends that the employer does not alter their address of record to that of the payroll provider as it may significantly restrict the company’s ability to be notified of tax matters including their organization.
– Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll providers are using EFTPS, so the employers can validate 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 occasionally validate payments. A warning ought to go up the first time a provider misses a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables companies to make any extra tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the appearance of a payroll service company, have actually stolen funds intended for payment of work taxes.

EFTPS is a secure, precise, and easy to use service that offers an immediate confirmation for each transaction. This service is offered totally free of charge from the U.S. Department of Treasury and permits companies to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. To learn more, employers can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment type or to speak with a client service representative.

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

Employers who believe that an or notice received is an outcome of an issue with their payroll service company ought to get in touch with the IRS as soon as possible by calling the number on the costs, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or going to a regional IRS office. To learn more about IRS notices, expenses and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.