Outsourcing Payroll Duties

Outsourcing payroll tasks can be a sound company practice, however … Know your tax obligations as a company

Many employers contract out some or all their payroll and associated tax duties to third-party payroll provider. Third-party payroll provider can simplify company operations and help satisfy 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 supplies the funds at first to the third-party.
– Reporting, collecting and depositing work taxes with state and federal authorities.

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

– The company is eventually responsible for the deposit and payment of federal tax liabilities. Even though the company might forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible celebration. If the third-party stops working to make the federal tax payments, then the IRS might assess penalties and interest on the company’s account. The employer is responsible for all taxes, penalties and interest due. The employer may likewise be held personally responsible for particular overdue federal taxes.
– If there are any problems with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly suggests that the company does not change their address of record to that of the payroll provider as it may considerably restrict the employer’s ability to be informed of tax matters involving their organization.
– Electronic Funds Transfer (EFT) must be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll providers are utilizing EFTPS, so the employers can confirm that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and use this PIN to regularly validate payments. A warning must increase the first time a provider misses a payment or makes a late payment. When an employer signs up 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 business, who acting under the appearance of a payroll provider, have taken funds meant for payment of work taxes.

EFTPS is a protected, accurate, and simple to use service that provides an immediate confirmation for each deal. This service is used free of charge from the U.S. Department of Treasury and allows companies 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 an enrollment form or to consult with a customer service representative.

Remember, employers are eventually accountable for the payment of income tax withheld and of both the company and staff member portions of social security and Medicare taxes.

Employers who believe that an expense or notice received is a result of an issue with their payroll company ought to call the IRS as quickly as possible by calling the number on the costs, composing to the that sent out the expense, calling 800-829-4933 or visiting a regional IRS workplace. For more details about IRS notices, bills and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.