Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and associated tax tasks to third-party payroll company. Third-party payroll company can simplify service operations and help fulfill filing due dates and deposit requirements. Some of the services they supply are:

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

Employers who contract out some or all their payroll responsibilities need to consider the following:

– The company 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 may evaluate 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 problems 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 company as it might considerably restrict the company’s ability to be informed of tax matters involving their company.
– Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll service providers 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 periodically validate payments. A red flag must go up the first time a company misses a payment or makes a late payment. When a on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and companies, who acting under the appearance of a payroll provider, have taken funds planned for payment of employment taxes.

EFTPS is a safe and secure, precise, and simple to utilize service that provides an immediate verification for each deal. This service is provided complimentary of charge from the U.S. Department of Treasury and permits employers to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. For additional information, employers can register online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration form or to speak with a customer support agent.

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

Employers who think that a bill or notice gotten is a result of a problem with their payroll provider must contact the IRS as quickly as possible by calling the number on the costs, writing to the IRS office that sent out the costs, calling 800-829-4933 or checking out a regional IRS workplace. To learn more about IRS notifications, bills and payment options, describe Publication 594, The IRS Collection Process PDF.