Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and related tax duties to third-party payroll provider. Third-party payroll provider can simplify business operations and help meet filing deadlines and deposit requirements. Some of the services they offer are:

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

Employers who contract out some or all their payroll obligations ought to consider the following:

– The company is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the employer may forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible party. 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 company is liable for all taxes, charges and interest due. The company may also be held personally responsible for specific overdue federal taxes.
– If there are any issues 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 supplier as it may substantially restrict the employer’s ability to be informed of tax matters including their service.
– Electronic Funds Transfer (EFT) should be utilized to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll service providers are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and utilize this PIN to regularly confirm payments. A warning ought to increase the very first time a company misses a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS allows companies to make any extra tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and companies, who acting under the appearance of a payroll service provider, have taken funds meant for payment of employment taxes.

EFTPS is a secure, accurate, and simple to utilize service that supplies an instant verification for each deal. This service is provided complimentary of charge from the U.S. Department of Treasury and permits companies to make and validate federal tax payments 24 hr a day, 7 days a week through the web or by phone. To learn more, companies can enroll online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment kind or to speak to a client service representative.

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

Employers who think that a costs or notification received is an outcome of a problem with their payroll provider must contact the IRS as quickly as possible by calling the number on the costs, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or checking out a local IRS office. For more details about IRS notices, costs and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.