Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound organization practice, however … Know your tax obligations as a company

Many companies outsource some or all their and related tax duties to third-party payroll provider. Third-party payroll service providers can simplify business operations and assist satisfy filing deadlines and deposit requirements. Some of the services they supply are:

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

Employers who contract out some or all their payroll responsibilities ought to consider the following:

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible party. If the third-party fails to make the federal tax payments, then the IRS may examine penalties and interest on the company’s account. The employer is responsible for all taxes, charges and interest due. The employer may likewise be held personally liable for particular overdue federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly recommends that the employer does not change their address of record to that of the payroll provider as it might significantly restrict the employer’s ability to be notified of tax matters involving their business.
– Electronic Funds Transfer (EFT) need to be utilized to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll service providers 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 utilize this PIN to periodically confirm payments. A red flag ought to go up the very first time a company misses a payment or makes a late payment. When a company signs up 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 approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the appearance of a payroll service company, have actually taken funds planned for payment of work taxes.

EFTPS is a secure, precise, and simple to use service that provides an instant verification for each transaction. This service is offered complimentary of charge from the U.S. Department of Treasury and allows companies to make and validate federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For more info, companies can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment kind or to consult with a consumer service agent.

Remember, companies are eventually responsible for the payment of income tax kept and of both the company and employee portions of social security and Medicare taxes.

Employers who think that a costs or notice received is an outcome of a problem with their payroll provider should get in touch with the IRS as quickly as possible by calling the number on the bill, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or checking out a local IRS workplace. For more details about IRS notifications, expenses and payment choices, refer to Publication 594, The IRS Collection Process PDF.