Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax duties to third-party payroll company. Third-party payroll provider can enhance service operations and help fulfill filing due dates and deposit requirements. Some of the services they provide are:

– Administering payroll and employment taxes on behalf of the company where the employer offers 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 obligations need to consider the following:

– The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the company may forward the tax amounts 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 might assess penalties and interest on the employer’s account. The employer is accountable for all taxes, penalties and interest due. The employer might also be held personally liable for particular overdue federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly suggests that the employer does not change their address of record to that of the payroll company as it might considerably the company’s capability to be informed of tax matters including their company.
– Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll companies are utilizing 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 regularly confirm payments. A red flag should go up the very first time a provider misses out on a payment or makes a late payment. When an employer signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits 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 appearance of a payroll service provider, have stolen funds meant for payment of work taxes.

EFTPS is a secure, precise, and easy to utilize service that provides an immediate confirmation for each deal. This service is offered complimentary of charge from the U.S. Department of Treasury and permits companies to make and validate federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For additional information, companies can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment form or to speak to a consumer service representative.

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

Employers who think that a bill or notice gotten is an outcome of an issue with their payroll company ought to contact the IRS as soon as possible by calling the number on the costs, composing to the IRS office that sent the expense, calling 800-829-4933 or visiting a local IRS office. To find out more about IRS notifications, bills and payment options, describe Publication 594, The IRS Collection Process PDF.