Outsourcing Payroll Duties
Outsourcing payroll tasks can be a sound organization practice, however … Know your tax responsibilities as an employer
Many employers contract out some or all their payroll and associated tax responsibilities to third-party payroll company. Third-party payroll service suppliers can streamline company operations and help meet filing deadlines and deposit requirements. Some of the services they provide are:
– Administering payroll and employment taxes on behalf of the employer where the company provides the funds initially to the third-party.
– Reporting, collecting and transferring work taxes with state and federal authorities.
Employers who outsource some or all their payroll duties must consider the following:
– The company is eventually accountable for the deposit and payment of federal tax liabilities. Despite the fact that the employer may forward the tax amounts 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 might assess charges and interest on the company’s account. The employer is responsible for all taxes, charges and interest due. The employer might also be held personally accountable for specific unsettled 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 strongly recommends that the employer does not alter their address of record to that of the payroll service company as it may significantly limit the employer’s ability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) should be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll providers are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and use this PIN to occasionally confirm payments. A warning must go up the very first time a provider 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 permits 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 been prosecutions of individuals and companies, who acting under the appearance of a provider, have taken funds planned for payment of employment taxes.
EFTPS is a protected, accurate, and easy to use service that supplies an immediate verification for each deal. This service is used free of charge from the U.S. Department of Treasury and allows employers to make and validate federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For more details, employers can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration form or to speak to a customer care agent.
Remember, employers are eventually accountable for the payment of earnings tax kept and of both the company and worker portions of social security and Medicare taxes.
Employers who think that a bill or notice gotten is a result of a problem with their payroll provider should get in touch with the IRS as soon as possible by calling the number on the costs, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or going to a regional IRS workplace. To learn more about IRS notices, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.
