Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll service suppliers can streamline organization operations and assist satisfy filing deadlines and deposit requirements. Some of the services they offer are:

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

Employers who outsource some or all their payroll responsibilities should consider the following:

– The company is ultimately accountable for the deposit and of federal tax liabilities. Despite the fact that the company may forward the tax totals up 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 may assess penalties and interest on the employer’s account. The employer is responsible for all taxes, charges and interest due. The employer might likewise be held personally accountable for certain unsettled federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the company 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 supplier as it might substantially restrict the company’s capability to be notified of tax matters involving their organization.
– Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll suppliers are utilizing EFTPS, so the employers can validate that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and utilize this PIN to regularly validate payments. A warning ought 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 enables employers to make any additional tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and companies, who acting under the look of a payroll company, have actually taken funds intended for payment of work taxes.

EFTPS is a safe and secure, accurate, and easy to use service that offers an immediate confirmation for each transaction. This service is offered free of charge from the U.S. Department of Treasury and allows companies to make and confirm federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. To learn more, companies can enroll online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment type or to talk with a customer care agent.

Remember, companies 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 an expense or notification received is an outcome of an issue with their payroll company should get in touch with the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent out the costs, calling 800-829-4933 or visiting a local IRS office. For additional information about IRS notifications, expenses and payment choices, describe Publication 594, The IRS Collection Process PDF.