Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and associated tax tasks to third-party payroll company. Third-party payroll service companies can streamline business operations and help meet filing deadlines and deposit requirements. A few of the services they provide are:

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

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

– The employer is eventually responsible for the deposit and payment of federal tax liabilities. Even though the company might forward the tax amounts to the third-party to make the tax deposits, the company is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS may examine penalties and interest on the employer’s account. The employer is accountable for all taxes, penalties and interest due. The employer might likewise be held personally accountable for certain unsettled federal taxes.
– If there are any problems with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly recommends that the company does not alter their address of record to that of the payroll provider as it might considerably restrict the company’s capability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) should be used to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll service providers are utilizing EFTPS, so the employers can validate that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and utilize this PIN to occasionally confirm payments. A red flag should go up the very first time a provider misses out on 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 allows companies to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have actually been prosecutions of individuals and companies, who acting under the appearance of a payroll provider, have stolen funds intended for payment of employment taxes.

EFTPS is a protected, precise, and simple 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 permits employers to make and validate federal tax payments electronically 24 hr 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 Service at 800-555-4477 for an or to speak with a client service representative.

Remember, employers are eventually responsible for the payment of income tax kept and of both the employer and staff member parts of social security and Medicare taxes.

Employers who believe that a costs or notice gotten is an outcome of a problem with their payroll provider need to call the IRS as quickly as possible by calling the number on the costs, composing to the IRS office that sent the costs, calling 800-829-4933 or visiting a regional IRS workplace. For additional information about IRS notifications, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.