Outsourcing Payroll Duties

Outsourcing payroll responsibilities can be a sound organization practice, but … Know your tax responsibilities as an employer

Many companies contract out some or all their payroll and associated tax duties to third-party payroll company. Third-party payroll provider can simplify organization operations and help fulfill filing deadlines and deposit requirements. A few of the services they provide are:

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

Employers who contract out some or all their payroll duties should consider the following:

– The employer is ultimately 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 accountable party. If the third-party fails to make the federal tax payments, then the IRS might examine penalties and interest on the account. The employer is liable for all taxes, charges and interest due. The employer might likewise be held personally liable for particular unpaid federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly suggests that the employer does not change their address of record to that of the payroll company as it may substantially restrict the company’s capability to be informed of tax matters involving their company.
– Electronic Funds Transfer (EFT) need to be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll companies 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 needs to increase the first time a service supplier misses a payment or makes a late payment. When an employer registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows companies 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 people and business, who acting under the look of a payroll service supplier, have actually taken funds intended for payment of employment taxes.

EFTPS is a protected, precise, and simple to utilize service that provides an instant verification for each deal. This service is used free of charge from the U.S. Department of Treasury and permits companies to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. For more details, employers can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration kind or to speak with a client service agent.

Remember, companies are eventually accountable for the payment of earnings tax kept and of both the company and staff member parts of social security and Medicare taxes.

Employers who believe that a bill or notification received is an outcome of a problem with their payroll service provider must contact the IRS as quickly as possible by calling the number on the expense, writing to the IRS office that sent out the costs, calling 800-829-4933 or going to a local IRS office. To find out more about IRS notices, bills and payment choices, describe Publication 594, The IRS Collection Process PDF.