Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and associated tax tasks to third-party payroll service suppliers. Third-party payroll provider can improve company operations and help meet filing deadlines and deposit requirements. Some of the services they supply are:

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

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

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Even though the employer 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 may examine charges and interest on the employer’s account. The employer is responsible for all taxes, penalties and interest due. The employer may likewise be held personally responsible for specific overdue federal taxes.
– If there are any concerns with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly suggests that the employer does not alter their address of record to that of the payroll company as it may substantially limit the company’s capability to be notified of involving their service.
– 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 should guarantee their payroll providers are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and use this PIN to periodically verify payments. A red flag needs to increase the very first time a company misses out on 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 enables companies 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 business, who acting under the appearance of a payroll service company, have actually stolen funds intended for payment of work taxes.

EFTPS is a protected, precise, and easy to utilize service that offers an instant verification for each transaction. This service is offered totally free of charge from the U.S. Department of Treasury and enables companies to make and verify federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. To find out more, employers can register online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to talk to a client service representative.

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

Employers who believe that a costs or notice received is an outcome of an issue with their payroll provider must contact the IRS as soon as possible by calling the number on the expense, writing to the IRS office that sent out the bill, calling 800-829-4933 or checking out a regional IRS office. To learn more about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.