Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and associated tax tasks to third-party payroll provider. Third-party payroll service suppliers can operations and assist satisfy filing due dates and deposit requirements. A few of the services they provide are:

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

Employers who outsource some or all their payroll duties need to consider 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 amounts to the third-party to make the tax deposits, the employer is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS might examine charges and interest on the company’s account. The company is liable for all taxes, charges and interest due. The employer might also be held personally accountable for specific overdue 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 strongly recommends that the employer does not change their address of record to that of the payroll company as it may significantly restrict the company’s ability to be notified of tax matters involving their service.
– 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 must guarantee their payroll suppliers are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally validate payments. A warning needs to increase the very first time a provider misses a payment or makes a late payment. When an employer signs up on EFTPS they will have online 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 estimated tax payments. There have been prosecutions of people and companies, who acting under the look of a payroll service supplier, have stolen funds meant for payment of work taxes.

EFTPS is a secure, accurate, and easy to utilize service that offers an immediate confirmation for each deal. This service is offered complimentary of charge from the U.S. Department of Treasury and permits employers to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. To learn more, employers can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment kind or to speak to a client service agent.

Remember, employers are ultimately accountable for the payment of income tax kept and of both the company and staff member portions of social security and Medicare taxes.

Employers who think that a costs or notification received is a result of a problem with their payroll service company need to call the IRS as quickly as possible by calling the number on the expense, writing to the IRS workplace that sent the bill, calling 800-829-4933 or visiting a regional IRS workplace. For more details about IRS notices, bills and payment choices, describe Publication 594, The IRS Collection Process PDF.