Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and associated tax duties to third-party payroll service providers. Third-party payroll provider can enhance company operations and help fulfill 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 offers the funds initially to the third-party.
– Reporting, collecting and depositing work taxes with state and federal authorities.

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

– The employer is eventually accountable 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 employer is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS might examine penalties and interest on the employer’s account. The employer is accountable for all taxes, penalties and interest due. The company may likewise be held personally accountable for particular overdue federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly suggests that the company does not alter their address of record to that of the payroll company as it may significantly restrict the company’s capability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll service providers are using EFTPS, so the employers can validate 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 red flag should increase the first time a company 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 permits employers to make any extra tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have actually been prosecutions of people and business, who acting under the appearance of a payroll provider, have taken funds planned for payment of employment taxes.

EFTPS is a safe, precise, and easy to use service that offers an instant confirmation for each deal. This service is provided totally free of charge from the U.S. Department of Treasury and enables employers to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more info, employers can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment kind or to talk to a customer care representative.

Remember, companies are eventually responsible for the payment of income tax withheld and of both the company and staff member parts of social security and Medicare taxes.

Employers who think that a bill or notification received is a result of a problem with their payroll company must contact the IRS as quickly as possible by calling the number on the bill, composing to the IRS workplace that sent out the bill, calling 800-829-4933 or going to a local IRS office. For more details about IRS notices, costs and payment choices, refer to Publication 594, The IRS Collection Process PDF.