Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and related tax tasks to third-party payroll provider. Third-party payroll service providers can streamline business operations and assist satisfy filing deadlines and deposit requirements. A few of the services they supply are:

– Administering payroll and employment 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 obligations ought to think about 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 accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS might assess charges and interest on the company’s account. The company is accountable for all taxes, charges and interest due. The company might also be held personally accountable for particular 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 strongly recommends that the company does not change their address of record to that of the payroll company as it may substantially limit the employer’s capability to be notified of tax matters involving their organization.
– Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll suppliers are utilizing EFTPS, so the employers can confirm that payments are being made on their behalf. Employers need to sign up on the EFTPS system to get their own PIN and utilize this PIN to regularly validate payments. A red flag should go up the very first time a company misses a payment or makes a late payment. When an employer registers 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 service provider is not making on their behalf such as approximated tax payments. There have been prosecutions of people and business, who acting under the appearance of a payroll provider, have taken funds intended for payment of employment taxes.

EFTPS is a protected, precise, and easy to use that offers an instant verification for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and permits companies to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. For additional information, companies can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment form or to speak to a client service representative.

Remember, companies 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 a costs or notice received is an outcome of an issue with their payroll provider must contact the IRS as quickly as possible by calling the number on the costs, composing to the IRS office that sent the bill, calling 800-829-4933 or visiting a local IRS workplace. To find out more about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.