Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and associated tax tasks to third-party payroll service suppliers. Third-party payroll company can improve business operations and assist fulfill filing deadlines and deposit requirements. Some of the services they supply are:

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

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

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Although the company may forward the tax amounts 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 might assess penalties and interest on the company’s account. The employer is liable for all taxes, and interest due. The employer might likewise be held personally liable for specific unsettled 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 company does not change their address of record to that of the payroll provider as it might considerably restrict the company’s capability to be informed of tax matters including their service.
– Electronic Funds Transfer (EFT) need to be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll companies are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and utilize this PIN to regularly verify payments. A warning should go up the very first time a service supplier misses 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 enables companies to make any extra tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have actually been prosecutions of individuals and companies, who acting under the appearance of a payroll service supplier, have actually taken funds intended for payment of employment taxes.

EFTPS is a safe, precise, and easy to utilize service that supplies an immediate verification for each deal. This service is provided complimentary of charge from the U.S. Department of Treasury and enables employers to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. For additional information, companies can register online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to speak to a customer support agent.

Remember, companies are eventually accountable for the payment of earnings tax withheld and of both the company and staff member portions of social security and Medicare taxes.

Employers who think that an expense or notification received is a result of a problem with their payroll service provider need to get in touch with the IRS as quickly as possible by calling the number on the costs, composing to the IRS office that sent out the bill, calling 800-829-4933 or going to a local IRS workplace. To learn more about IRS notifications, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.