Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and associated tax duties to third-party payroll provider. Third-party payroll provider can improve organization operations and assist fulfill filing due dates and deposit requirements. A few of the services they supply are:

– Administering payroll and employment taxes on behalf of the employer where the employer offers the funds at first to the third-party.
– Reporting, gathering and depositing employment taxes with state and federal authorities.

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

– The company is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the employer might forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS may assess penalties and interest on the company’s account. The employer is accountable for all taxes, charges and interest due. The company may also be held personally responsible for certain 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 highly recommends that the employer does not change their address of record to that of the payroll company as it might substantially restrict the employer’s capability to be notified of tax matters including their service.
– Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll suppliers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally confirm payments. A warning ought to go up the first time a company misses a payment or makes a late payment. When an employer signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits employers to make any payments that their third-party provider is not making on their behalf such as approximated tax payments. There have been prosecutions of people and business, who acting under the appearance of a payroll provider, have stolen funds meant for payment of work taxes.

EFTPS is a protected, precise, and easy to utilize service that offers an immediate verification for each transaction. This service is provided complimentary of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. For additional information, companies can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment type or to consult with a customer care agent.

Remember, employers are ultimately accountable for the payment of earnings tax withheld and of both the employer and staff member parts of social security and Medicare taxes.

Employers who think that a costs or notification gotten is a result of a problem with their payroll company should contact the IRS as soon as possible by calling the number on the bill, writing to the IRS office that sent out the costs, calling 800-829-4933 or visiting a regional IRS office. For more details about IRS notices, costs and payment choices, describe Publication 594, The IRS Collection Process PDF.