Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax tasks to third-party payroll company. Third-party payroll service providers can simplify service operations and help satisfy filing deadlines and deposit requirements. A few of the services they provide are:

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

Employers who contract out some or all their payroll obligations need to consider the following:

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Although 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 stops working to make the federal tax payments, then the IRS may examine charges and interest on the employer’s account. The company is liable for all taxes, penalties and interest due. The employer may likewise be held personally accountable for particular unpaid 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 strongly recommends that the employer does not alter their address of record to that of the payroll service supplier as it might substantially restrict the company’s capability to be informed of tax matters including their company.
Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll suppliers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and use this PIN to regularly confirm payments. A red flag should increase 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 allows companies to make any additional tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the appearance of a payroll company, have taken funds planned for payment of employment taxes.

EFTPS is a secure, precise, and easy to use service that offers an immediate confirmation for each deal. This service is used complimentary of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. To find out more, companies can enroll online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to talk to a client service agent.

Remember, employers are ultimately responsible for the payment of earnings tax kept and of both the company and staff member parts of social security and Medicare taxes.

Employers who believe that a costs or notification received is a result of an issue with their payroll service company need to contact the IRS as soon as possible by calling the number on the costs, writing to the IRS office that sent out the costs, calling 800-829-4933 or going to a local IRS workplace. For more information about IRS notices, expenses and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.