Outsourcing Payroll Duties
Outsourcing payroll responsibilities can be a sound business practice, but … Know your tax duties as an employer
Many companies contract out some or all their payroll and associated tax tasks to third-party payroll provider. Third-party payroll provider can enhance service operations and assist meet filing deadlines and deposit requirements. Some of the services they offer are:
– Administering payroll and employment taxes on behalf of the employer where the company supplies the funds at first to the third-party.
– Reporting, collecting and transferring work taxes with state and federal authorities.
Employers who outsource some or all their payroll obligations must consider the following:
– The company is ultimately accountable 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 accountable party. If the third-party stops working to make the federal tax payments, then the IRS might examine penalties and interest on the employer’s account. The company is liable for all taxes, charges and interest due. The employer may likewise be held personally responsible for certain overdue federal taxes.
– If there are any issues 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 alter their address of record to that of the payroll company as it might significantly restrict the employer’s capability to be notified of tax matters involving their service.
– Electronic (EFT) need to be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll companies are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to occasionally verify payments. A warning must go up the very first time a service company misses out on a payment or makes a late payment. When a company registers 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 supplier is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the appearance of a payroll provider, have taken funds planned for payment of employment taxes.
EFTPS is a secure, accurate, and simple to use service that supplies an immediate verification for each transaction. This service is used free of charge from the U.S. Department of Treasury and allows companies to make and verify federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. To find out more, employers can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to speak to a customer care representative.
Remember, employers are ultimately accountable for the payment of earnings tax withheld and of both the employer and employee parts of social security and Medicare taxes.
Employers who believe that an expense or notification gotten is a result of an issue with their payroll company ought to call the IRS as soon as possible by calling the number on the expense, composing to the IRS office that sent the bill, calling 800-829-4933 or going to a local IRS office. To find out more about IRS notifications, costs and payment alternatives, describe Publication 594, The IRS Collection Process PDF.
