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Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and related tax tasks to third-party payroll provider. Third-party payroll company can simplify business operations and assist meet filing due dates and deposit requirements. A few of the services they offer are:

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

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

— The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the employer might forward the tax totals up to the third-party to make the tax deposits, the company is the responsible party. If the third-party fails to make the federal tax payments, then the IRS might assess penalties and interest on the company’s account. The employer is accountable for all taxes, penalties and interest due. The company might also be held personally accountable for particular unsettled federal taxes.
— If there are any concerns with an account, then the IRS will send correspondence to the employer at the address of record. The IRS strongly recommends that the employer does not alter their address of record to that of the payroll provider as it may substantially restrict the employer’s capability to be informed of tax matters involving their company.
— Electronic Funds Transfer (EFT) must be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll companies are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and use this PIN to periodically verify payments. A warning ought to go up the very first time a service company misses a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables employers to make any extra tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and companies, who acting under the appearance of a payroll company, have stolen funds intended for payment of work taxes.

EFTPS is a secure, accurate, and easy to use service that offers an immediate confirmation for each transaction. This service is used complimentary of charge from the U.S. Department of Treasury and permits companies to make and validate federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. To learn more, employers can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration kind or to speak with a customer support representative.

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

Employers who think that an expense or notice gotten is a result of an issue with their payroll company need to contact the IRS as soon as possible by calling the number on the bill, composing to the IRS workplace that sent the costs, 800-829-4933 or checking out a regional IRS workplace. For additional information about IRS notifications, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.