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Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll provider can simplify organization operations and assist meet filing due dates and deposit requirements. A few of the services they supply are:

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

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

– The company is eventually accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company 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 may assess charges and interest on the employer’s account. The company is accountable for all taxes, charges and interest due. The employer may likewise be held personally liable for certain unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly recommends that the employer does not alter their address of record to that of the payroll service company as it may substantially limit the company’s ability to be notified of tax matters including their business.
– Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll providers are utilizing EFTPS, so the companies can verify that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and utilize this PIN to periodically validate payments. A red flag ought to go up the first time a provider misses out on a payment or makes a late payment. When an employer signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables employers to make any additional tax payments that their third-party service 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 look of a payroll service provider, have stolen funds meant for payment of work taxes.

EFTPS is a safe, precise, and easy to use service that offers an instant verification for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and enables companies to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. To find out more, companies can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment type or to talk to a customer care agent.

Remember, companies are eventually accountable 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 a bill or notification received is a result of an issue with their payroll provider ought to contact the IRS as soon as possible by calling the number on the expense, writing to the IRS workplace that sent the costs, calling 800-829-4933 or visiting a regional IRS workplace. To learn more about IRS notices, costs and payment options, refer to Publication 594, The IRS Collection Process PDF.