Outsourcing Payroll Duties
Outsourcing payroll tasks can be a sound business practice, however … Know your tax responsibilities as a company
Many employers contract out some or all their payroll and related tax responsibilities to third-party payroll provider. Third-party payroll service providers can improve business operations and help satisfy filing deadlines and deposit requirements. A few of the services they provide are:
– Administering payroll and work taxes on behalf of the employer where the company offers 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 obligations should consider the following:
– The company is eventually accountable for the deposit and payment of federal tax liabilities. Although the company may forward the tax totals up 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 may examine penalties and interest on the employer’s account. The company is liable for all taxes, penalties and interest due. The employer might likewise be held personally accountable for specific 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 change their address of record to that of the payroll service supplier as it might significantly limit the employer’s capability to be informed of tax matters involving their service.
– Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll suppliers are using EFTPS, so the companies can verify 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 . A warning needs to increase the first time a service company misses 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 allows employers to make any additional tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll company, have actually taken funds meant for payment of work taxes.
EFTPS is a protected, precise, and simple to use service that supplies an immediate verification for each deal. This service is offered free of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. To learn more, companies can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment kind or to speak to a customer care representative.
Remember, companies are ultimately accountable for the payment of income tax kept and of both the company and staff member portions of social security and Medicare taxes.
Employers who believe that an expense or notice gotten is an outcome of a problem with their payroll provider must get in touch with the IRS as quickly as possible by calling the number on the costs, writing to the IRS workplace that sent out the expense, calling 800-829-4933 or checking out a local IRS office. To find out more about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.
