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Outsourcing Payroll Duties

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

Many employers contract out some or all their payroll and related tax tasks to third-party payroll service companies. Third-party payroll provider can simplify organization operations and help fulfill filing deadlines and deposit requirements. Some of the services they supply are:

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

– The company is eventually 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 accountable party. If the third-party fails to make the federal tax payments, then the IRS may evaluate penalties and interest on the company’s account. The employer is responsible for all taxes, penalties and interest due. The employer might likewise be held personally accountable for certain unsettled 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 strongly suggests that the company does not change their address of record to that of the payroll provider as it might substantially restrict the employer’s capability to be notified of tax matters involving their service.
– Electronic Funds Transfer (EFT) should be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal System (EFTPS). Employers should ensure their payroll providers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and use this PIN to occasionally confirm payments. A warning must go up the very first time a company misses out on 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 company is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the look of a payroll company, have taken funds meant for payment of employment taxes.

EFTPS is a safe and secure, precise, and simple to utilize service that offers an instant verification for each deal. This service is provided free of charge from the U.S. Department of Treasury and allows employers 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 Customer support at 800-555-4477 for an enrollment kind or to talk to a client service agent.

Remember, employers are eventually accountable for the payment of income tax kept and of both the employer and staff member parts of social security and Medicare taxes.

Employers who think that an expense or notice received is an outcome of a problem with their payroll provider ought to get in touch with the IRS as quickly as possible by calling the number on the expense, writing to the IRS workplace that sent the bill, calling 800-829-4933 or checking out a local IRS workplace. For additional information about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.