Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax tasks to third-party payroll company. Third-party payroll provider can simplify business operations and help meet filing deadlines and deposit requirements. A few of the services they supply are:

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

Employers who contract out some or all their payroll duties must think about 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 amounts to the third-party to make the tax deposits, the company is the responsible celebration. If the third-party stops working to make the federal tax payments, then the IRS may examine penalties and interest on the company’s account. The company is liable for all taxes, charges and interest due. The employer may likewise be liable for certain unpaid federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the employer 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 might considerably restrict the employer’s ability to be informed of tax matters involving their business.
– Electronic Funds Transfer (EFT) must be utilized 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 verify that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and use this PIN to occasionally verify payments. A red flag must go up the very first time a service provider misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS permits companies to make any additional tax payments that their third-party service provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and companies, who acting under the look of a payroll service company, have actually taken funds intended for payment of employment taxes.

EFTPS is a safe and secure, precise, and easy to use service that offers an instant verification for each transaction. This service is offered free of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For more details, companies can register online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration form or to consult with a client service representative.

Remember, companies are eventually accountable for the payment of income tax kept and of both the company and staff member parts of social security and Medicare taxes.

Employers who believe that an expense or notification received is an outcome of an issue with their payroll service provider ought to get in touch with the IRS as soon as possible by calling the number on the bill, writing to the IRS workplace that sent the bill, calling 800-829-4933 or checking out a regional IRS workplace. For more details about IRS notifications, costs and payment choices, refer to Publication 594, The IRS Collection Process PDF.