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Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound company practice, however … Know your tax responsibilities as an employer

Many companies outsource some or all their payroll and associated tax duties to third-party payroll service suppliers. Third-party payroll company can simplify company operations and assist satisfy filing deadlines and deposit requirements. A few of the services they supply are:

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

Employers who outsource some or all their payroll obligations must consider the following:

– The company is eventually responsible for the deposit and payment of federal tax liabilities. Despite the fact that the company may forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible celebration. If the third-party fails to make the federal tax payments, then the IRS might evaluate penalties and interest on the company’s account. The employer is liable for all taxes, penalties and interest due. The employer may likewise be held personally liable for certain overdue federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly recommends that the employer does not change their address of record to that of the payroll service provider as it may considerably limit the company’s ability to be informed of tax matters involving their business.
– Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is used 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 must sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally verify payments. A red flag ought to go up the first time a provider 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 additional 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 look of a provider, have actually taken funds meant for payment of work taxes.

EFTPS is a protected, precise, and easy to utilize service that offers an immediate confirmation for each deal. This service is used complimentary of charge from the U.S. Department of Treasury and enables companies to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. To learn more, employers can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration form or to consult with a customer support representative.

Remember, employers are ultimately responsible for the payment of income tax withheld and of both the company and worker portions of social security and Medicare taxes.

Employers who believe that an expense or notice gotten is a result of a problem with their payroll company need to contact the IRS as soon as possible by calling the number on the costs, writing to the IRS office that sent out the costs, calling 800-829-4933 or going to a local IRS workplace. For additional information about IRS notices, costs and payment choices, describe Publication 594, The IRS Collection Process PDF.