Outsourcing Payroll Duties

Outsourcing payroll responsibilities can be a sound company practice, but … Know your tax responsibilities as a company

Many companies outsource some or all their payroll and associated tax tasks to third-party payroll service suppliers. Third-party payroll service suppliers can streamline business operations and assist satisfy filing deadlines and deposit requirements. Some of the services they provide are:

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

Employers who outsource some or all their payroll duties should think about the following:

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS might assess penalties and interest on the employer’s account. The company is liable for all taxes, charges and interest due. The employer might likewise be held personally responsible for certain unpaid 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 company does not alter their address of record to that of the payroll provider as it may substantially restrict the employer’s ability to be informed of tax matters involving their organization.
– Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll suppliers are using EFTPS, so the companies can verify that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and utilize this PIN to regularly validate payments. A red flag ought to increase the very first time a service company misses a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables employers to make any extra 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 company, have actually taken funds meant for payment of work taxes.

EFTPS is a protected, accurate, and simple to utilize service that provides an instant confirmation for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. To find out more, companies can register online at EFTPS.gov or call care at 800-555-4477 for an enrollment form or to consult with a client service agent.

Remember, employers are ultimately accountable for the payment of income tax withheld and of both the employer and staff member parts of social security and Medicare taxes.

Employers who believe that a costs or notice gotten is a result of a problem with their payroll provider must call the IRS as quickly as possible by calling the number on the costs, composing to the IRS office that sent out the expense, calling 800-829-4933 or checking out a local IRS workplace. For additional information about IRS notices, costs and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.