Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax tasks to third-party payroll service suppliers. Third-party payroll service companies can enhance company operations and help meet filing due dates and deposit requirements. A few of the services they provide are:

– Administering payroll and work taxes on behalf of the employer 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 duties need to think about the following:

– The company is eventually responsible for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS may evaluate charges and interest on the company’s account. The employer is liable for all taxes, penalties and interest due. The company may also be held personally responsible for particular overdue federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the employer at the address of record. The IRS highly recommends that the employer does not alter their address of record to that of the payroll company as it may substantially restrict the company’s ability to be notified of tax matters involving their service.
– Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll suppliers are using EFTPS, so the companies can verify that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally validate payments. A warning needs to go up the very first time a provider misses 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 permits employers to make any additional tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have been prosecutions of people and business, who acting under the look of a payroll company, have stolen funds meant for payment of employment taxes.

EFTPS is a protected, precise, and easy to use service that provides an instant confirmation for each transaction. This service is provided complimentary of charge from the U.S. Department of Treasury and enables companies to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. To learn more, employers can register online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration type or to speak to a customer support agent.

Remember, employers are ultimately accountable for the payment of income tax withheld and of both the company and staff member portions of social security and Medicare taxes.

Employers who believe that a costs or notification received is an outcome of a problem with their payroll service provider should get in touch with the IRS as soon as possible by calling the number on the bill, composing to the IRS workplace that sent out the costs, calling 800-829-4933 or checking out a local IRS office. To learn more about IRS notifications, costs and payment choices, describe Publication 594, The Process PDF.