Outsourcing Payroll Duties

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

Many companies contract out some or all their payroll and related tax tasks to third-party payroll company. Third-party payroll service suppliers can improve organization operations and assist satisfy filing deadlines and deposit requirements. A few of the services they offer are:

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

Employers who outsource some or all their payroll duties need to think about the following:

– The company is ultimately accountable 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 company is the accountable party. If the third-party fails to make the federal tax payments, then the IRS might evaluate penalties and interest on the company’s account. The employer is liable for all taxes, penalties and interest due. The company may also be held personally accountable for specific unsettled federal taxes.
– If there are any issues with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly suggests that the employer does not alter their address of record to that of the payroll service provider as it might substantially restrict the company’s ability to be informed of tax matters including their service.
– Electronic Funds Transfer (EFT) must be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll providers are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and utilize this PIN to periodically verify payments. A warning should increase the very first time a service provider misses out on 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 permits companies to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and companies, who acting under the look of a payroll company, have taken funds meant for payment of employment taxes.

EFTPS is a protected, accurate, and simple to use service that offers an immediate confirmation for each transaction. This service is offered totally free of charge from the U.S. Department of Treasury and enables employers to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. To find out more, companies can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment type or to talk with a client service agent.

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

Employers who believe that a costs or notice gotten is an outcome of a problem with their should get in touch with the IRS as quickly as possible by calling the number on the bill, composing to the IRS office that sent out the expense, calling 800-829-4933 or checking out a regional IRS office. To find out more about IRS notices, expenses and payment alternatives, describe Publication 594, The IRS Collection Process PDF.