Outsourcing Payroll Duties

Outsourcing payroll duties can be a sound organization 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 provider. Third-party payroll service suppliers can improve service operations and help satisfy filing deadlines and deposit requirements. Some of the services they supply are:

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

Employers who outsource some or all their payroll duties need to consider the following:

– The company is ultimately accountable 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 employer is the responsible celebration. If the third-party fails to make the federal tax payments, then the IRS might assess penalties and interest on the company’s account. The company is accountable for all taxes, charges and interest due. The company may also be held personally liable for particular overdue 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 highly suggests that the company does not alter their address of record to that of the payroll service provider as it may considerably restrict the employer’s ability to be informed of tax matters involving their business.
– Electronic Funds Transfer (EFT) must be utilized to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll suppliers 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 utilize this PIN to regularly confirm payments. A red flag ought to increase the very first time a company misses out on a payment or makes a late payment. When an employer signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and companies, who acting under the appearance of a payroll service supplier, have actually taken funds meant for payment of employment taxes.

EFTPS is a protected, accurate, and easy to use service that offers an immediate verification for each transaction. This service is provided free of charge from the U.S. Department of Treasury and enables companies to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the or by phone. To learn more, employers can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment type or to talk with a customer support representative.

Remember, companies are ultimately accountable 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 bill or notice received is an outcome of an issue with their payroll company must get in touch with the IRS as quickly as possible by calling the number on the expense, writing to the IRS office that sent out the expense, calling 800-829-4933 or checking out a regional IRS office. For additional information about IRS notices, expenses and payment options, refer to Publication 594, The IRS Collection Process PDF.