Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll provider can enhance business operations and help satisfy filing due dates and deposit requirements. A few of the services they supply are:

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

Employers who contract out some or all their payroll duties ought to think about the following:

– The employer 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 company is the responsible party. If the third-party fails to make the federal tax payments, then the IRS may evaluate penalties and interest on the employer’s account. The employer is accountable for all taxes, charges and interest due. The employer may also be held personally accountable for specific unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the company at the address of record. The IRS strongly suggests that the company does not alter their address of record to that of the payroll company as it may significantly limit the employer’s ability to be notified of including their company.
– Electronic Funds Transfer (EFT) must be used to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll companies are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and use this PIN to regularly validate payments. A red flag should increase the very first time a company misses out on a payment or makes a late payment. When a company registers on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS allows 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 been prosecutions of individuals and companies, who acting under the look of a payroll company, have stolen funds meant for payment of employment taxes.

EFTPS is a secure, accurate, and simple to use service that offers an immediate verification for each transaction. This service is provided free of charge from the U.S. Department of Treasury and permits employers to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For additional information, employers can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment kind or to speak to a customer support representative.

Remember, companies are ultimately accountable for the payment of income tax withheld and of both the company and employee parts of social security and Medicare taxes.

Employers who believe that a costs or notification gotten is a result of a problem with their payroll provider ought to call the IRS as soon as possible by calling the number on the bill, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or going to a local IRS office. For more details about IRS notices, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.