Outsourcing Payroll Duties
Outsourcing payroll tasks can be a sound business practice, but … Know your tax obligations as a company
Many employers outsource some or all their payroll and related tax duties to third-party payroll company. Third-party payroll company can streamline business operations and assist meet filing due dates and deposit requirements. Some of the services they supply are:
– Administering payroll and work taxes on behalf of the employer where the company offers the funds at first to the third-party.
– Reporting, gathering and transferring work taxes with state and federal authorities.
Employers who outsource some or all their payroll obligations should think about the following:
– The company is ultimately accountable for the deposit and payment of federal tax liabilities. Although the employer may forward the tax amounts to the third-party to make the tax deposits, the company is the accountable party. If the third-party fails to make the federal tax payments, then the IRS may assess penalties and interest on the employer’s account. The company is responsible for all taxes, charges and interest due. The employer might likewise be held personally responsible for particular 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 suggests that the employer does not alter their address of record to that of the payroll company as it may significantly limit the employer’s capability to be informed of tax matters involving their organization.
Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll providers are using EFTPS, so the employers can verify that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and utilize this PIN to periodically verify payments. A red flag must increase the very first time a provider misses a payment or makes a late payment. When an employer registers on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits employers to make any extra tax payments that their third-party service provider is not making on their behalf such as estimated tax payments. There have been prosecutions of people and companies, who acting under the appearance of a payroll company, have taken funds intended for payment of employment taxes.
EFTPS is a protected, precise, and easy to use service that provides an immediate verification for each deal. This service is provided totally free of charge from the U.S. Department of Treasury and allows employers to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. To learn more, employers can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration type or to talk with a client service agent.
Remember, companies are eventually responsible for the payment of income tax withheld and of both the employer and staff member portions of social security and Medicare taxes.
Employers who believe that a costs or notification gotten is an outcome of a problem with their payroll company should call the IRS as quickly as possible by calling the number on the bill, composing to the IRS office that sent out the costs, calling 800-829-4933 or visiting a local IRS workplace. To find out more about IRS notifications, costs and payment choices, refer to Publication 594, The IRS Collection Process PDF.