Outsourcing Payroll Duties

Outsourcing payroll responsibilities can be a sound organization practice, however … Know your tax duties as a company

Many employers outsource some or all their payroll and related tax duties to third-party payroll service companies. Third-party payroll service suppliers can enhance organization operations and help satisfy filing due dates and deposit requirements. Some of the services they offer are:

– Administering payroll and employment taxes on behalf of the company where the employer provides 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 duties should consider the following:

– The company is eventually responsible for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible party. If the third-party stops working 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, penalties and interest due. The employer may likewise be held personally responsible for particular unpaid federal taxes.
– If there are any problems with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly suggests that the employer does not alter their address of record to that of the payroll provider as it might substantially restrict the employer’s ability to be notified of tax matters including their service.
– Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll providers are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers should register 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 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 enables employers to make any additional tax payments that their third-party provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of individuals and business, who acting under the look of a payroll service company, have actually taken funds planned for payment of employment taxes.

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

Remember, companies are eventually accountable for the payment of earnings tax kept and of both the employer and staff member portions of social security and Medicare taxes.

Employers who think that an expense or notification received is an outcome of an issue with their payroll provider need to contact the IRS as quickly as possible by calling the number on the bill, writing to the IRS office that sent out the bill, calling 800-829-4933 or visiting a regional IRS office. For additional information about IRS notices, costs and payment choices, refer to Publication 594, The Process PDF.