Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and associated tax tasks to third-party payroll company. Third-party payroll company can enhance business 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 company where the employer supplies the funds initially to the third-party.
– Reporting, gathering and transferring employment taxes with state and federal authorities.

Employers who contract out some or all their payroll responsibilities should consider the following:

– The company is eventually responsible for the deposit and payment of federal tax liabilities. Even though the employer might forward the tax totals up to the third-party to make the tax deposits, the company is the responsible party. If the third-party fails to make the federal tax payments, then the IRS might examine charges and interest on the employer’s account. The employer is responsible for all taxes, charges and interest due. The employer might also be held personally liable for certain unpaid 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 strongly recommends that the employer does not alter their address of record to that of the payroll company as it might considerably limit the employer’s capability to be informed of tax matters including their service.
– Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll service providers are utilizing EFTPS, so the companies can verify that payments are being made on their behalf. Employers need to on the EFTPS system to get their own PIN and use this PIN to periodically verify payments. A warning needs to go up the very first time a service supplier misses 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 enables employers to make any additional tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll service supplier, have stolen funds meant for payment of work taxes.

EFTPS is a secure, accurate, and simple to use service that offers an instant verification for each transaction. This service is used complimentary of charge from the U.S. Department of Treasury and allows employers to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. To find out more, employers can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration form or to consult with a customer care representative.

Remember, companies are ultimately responsible 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 an issue with their payroll service supplier must contact the IRS as soon as possible by calling the number on the expense, composing to the IRS office that sent out the expense, calling 800-829-4933 or going to a regional IRS workplace. For more details about IRS notices, costs and payment options, refer to Publication 594, The IRS Collection Process PDF.