Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and related tax responsibilities to third-party payroll service companies. Third-party payroll provider can improve organization operations and help fulfill filing deadlines and deposit requirements. A few of the services they supply are:

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

Employers who outsource some or all their payroll obligations need to consider the following:

– The employer is eventually accountable for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS may examine charges and interest on the employer’s account. The company is responsible for all taxes, penalties and interest due. The employer might also be held personally accountable for certain unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS strongly recommends that the company does not alter their address of record to that of the payroll provider as it may considerably limit the company’s ability to be notified of tax matters involving their service.
– 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 need to guarantee their payroll service providers are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and utilize this PIN to periodically confirm payments. A red flag needs to increase the very first time a provider misses a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits companies 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 look of a payroll service provider, have taken funds meant for of work taxes.

EFTPS is a protected, precise, and simple to use service that offers an instant verification for each transaction. This service is provided free of charge from the U.S. Department of Treasury and allows companies to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the web or by phone. For more details, employers can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment form or to speak to a customer care agent.

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

Employers who think that an expense or notification gotten is a result of an issue with their payroll provider need to call the IRS as soon as possible by calling the number on the costs, writing to the IRS workplace that sent the bill, calling 800-829-4933 or checking out a local IRS office. To learn more about IRS notices, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.