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Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and associated tax duties to third-party payroll company. Third-party payroll provider can improve organization operations and assist satisfy filing due dates and deposit requirements. A few of the services they supply are:

– Administering payroll and work taxes on behalf of the employer where the company provides 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 responsibilities must think about the following:

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the employer might 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 may evaluate penalties and interest on the company’s account. The employer is liable for all taxes, charges and interest due. The employer may likewise be held personally responsible for specific unpaid federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly suggests that the employer does not change their address of record to that of the payroll provider as it may substantially limit the company’s capability to be informed of tax matters involving their organization.
– Electronic Funds Transfer (EFT) must be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll companies are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and use this PIN to regularly verify payments. A red flag must increase the very first time a service company misses out on a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables companies to make any extra tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll provider, have taken funds intended for payment of work taxes.

EFTPS is a protected, accurate, and easy to utilize service that offers an immediate verification for each deal. This service is used 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 additional information, companies can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to talk with a customer service representative.

Remember, employers are eventually accountable for the payment of income tax withheld and of both the company and staff member parts of social security and Medicare taxes.

Employers who think that a costs or notice gotten is an outcome of an issue with their payroll company must contact the IRS as quickly as possible by calling the number on the expense, composing to the IRS office that sent out the bill, calling 800-829-4933 or out a local IRS workplace. To learn more about IRS notifications, bills and payment choices, describe Publication 594, The IRS Collection Process PDF.