Outsourcing Payroll Duties

Outsourcing payroll duties can be a sound company practice, however … Know your tax duties as an employer

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

– Administering payroll and work taxes on behalf of the company where the company 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 must think about the following:

– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Although 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 fails to make the federal tax payments, then the IRS might evaluate charges and interest on the company’s account. The company is liable for all taxes, charges and interest due. The company may also be held personally liable for specific overdue federal taxes.
– If there are any issues with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly recommends that the company does not change their address of record to that of the payroll company as it may substantially limit the employer’s ability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll providers are utilizing EFTPS, so the companies can verify that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and utilize this PIN to periodically confirm payments. A warning needs to increase the first time a service supplier 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 employers to make any extra tax payments that their third-party service provider is not making on their behalf such as approximated tax payments. There have been prosecutions of people and companies, who acting under the look of a payroll service supplier, have stolen funds intended for payment of work taxes.

EFTPS is a protected, accurate, and easy to utilize service that supplies an immediate verification for each deal. This service is offered free of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. To find out more, employers can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration type or to talk with a customer support agent.

Remember, companies are eventually accountable for the payment of earnings tax withheld and of both the employer and staff member portions of social security and Medicare taxes.

Employers who believe that a costs or notification gotten is an outcome of an issue with their payroll provider need to contact the IRS as soon as possible by calling the number on the expense, composing to the IRS workplace that sent the bill, calling 800-829-4933 or checking out a regional IRS . To find out more about IRS notices, expenses and payment choices, describe Publication 594, The IRS Collection Process PDF.