Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll service companies can enhance service operations and assist fulfill filing deadlines and deposit requirements. A few of the services they offer are:

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

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

– The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax totals up to the third-party to make the tax deposits, the company is the responsible celebration. If the third-party stops working to make the federal tax payments, then the IRS may assess penalties and interest on the company’s account. The employer is accountable for all taxes, charges and interest due. The employer may also 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 employer at the address of record. The IRS strongly suggests that the company does not change their address of record to that of the payroll service provider as it might significantly limit the company’s ability 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 must 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 periodically verify payments. A warning must go up the very first time a service supplier misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS enables employers to make any additional tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and companies, who acting under the appearance of a payroll service supplier, have taken funds intended for payment of employment taxes.

EFTPS is a protected, precise, and easy to utilize service that offers an instant confirmation for each deal. This service is offered complimentary of charge from the U.S. Department of Treasury and permits companies to make and confirm federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. For more details, companies can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration kind or to talk to a customer care representative.

Remember, employers are ultimately accountable 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 a costs or notice received is a result of an issue with their payroll company must contact the IRS as soon as possible by calling the number on the costs, composing to the IRS workplace that sent the bill, calling 800-829-4933 or going to a regional IRS . For more details about IRS notices, bills and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.