Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and associated tax duties to third-party payroll provider. Third-party payroll provider can improve organization operations and help satisfy filing due dates and deposit requirements. Some of the services they supply are:

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

Employers who contract out some or all their payroll duties must think about the following:

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Even though the employer might forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible party. 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 liable for all taxes, penalties and interest due. The company may also be held personally accountable for specific overdue federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the employer at the address of record. The IRS highly suggests that the company does not alter their address of record to that of the payroll service provider as it might significantly limit the company’s capability to be informed of tax matters involving their service.
– Electronic (EFT) need to be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll service providers are using EFTPS, so the companies can validate that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally validate payments. A warning needs to go up the very first time a service 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 allows companies to make any additional tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have been prosecutions of people and business, who acting under the look of a payroll service company, have taken funds planned for payment of employment taxes.

EFTPS is a protected, accurate, and easy to utilize service that supplies an immediate confirmation for each deal. This service is used totally free of charge from the U.S. Department of Treasury and permits employers to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. For more information, employers can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration kind or to talk with a client service agent.

Remember, employers are eventually responsible for the payment of earnings tax withheld and of both the employer and staff member portions of social security and Medicare taxes.

Employers who believe that an expense or notification received is an outcome of a problem with their payroll service supplier should get in touch with the IRS as soon as possible by calling the number on the costs, writing to the IRS office that sent the expense, calling 800-829-4933 or visiting a regional IRS workplace. For more details about IRS notifications, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.