Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and associated tax tasks to third-party payroll provider. Third-party payroll service providers can simplify organization operations and help meet filing due dates and deposit requirements. A few of the services they provide are:

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

Employers who outsource some or all their need to think about the following:

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the company might forward the tax totals up to the third-party to make the tax deposits, the company is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS may evaluate charges and interest on the company’s account. The employer is responsible for all taxes, charges and interest due. The company may likewise be held personally accountable for specific unsettled federal taxes.
– If there are any problems with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS strongly recommends that the employer does not alter their address of record to that of the payroll company as it might significantly restrict the employer’s capability to be informed of tax matters including their organization.
– Electronic Funds Transfer (EFT) should be used to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll providers are using EFTPS, so the companies can validate that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and use this PIN to regularly verify payments. A red flag should go up the very first time a provider misses out on a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS permits companies to make any extra tax payments that their third-party provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and business, who acting under the appearance of a payroll service company, have taken funds meant for payment of work taxes.

EFTPS is a secure, precise, and easy to use service that supplies an instant verification for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and enables companies to make and validate federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For additional information, employers can register online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration type or to talk with a customer support agent.

Remember, companies are eventually accountable for the payment of earnings tax kept and of both the employer and staff member parts of social security and Medicare taxes.

Employers who believe that a bill or notice received is a result of an issue with their payroll company need to get in touch with the IRS as soon as possible by calling the number on the expense, writing to the IRS office that sent the costs, calling 800-829-4933 or checking out a regional IRS office. For more info about IRS notifications, expenses and payment options, refer to Publication 594, The IRS Collection Process PDF.