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Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and related tax responsibilities to third-party payroll service companies. Third-party payroll company can streamline organization operations and assist satisfy filing deadlines and deposit requirements. Some of the services they offer are:

– Administering payroll and employment taxes on behalf of the employer where the company offers the funds initially to the third-party.
– Reporting, gathering and transferring employment 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 responsible for the deposit and payment of federal tax liabilities. Although the company may forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS might evaluate penalties and interest on the company’s account. The employer is accountable for all taxes, penalties and interest due. The company may likewise be held personally liable for certain unsettled federal taxes.
– If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly recommends that the employer does not alter their address of record to that of the payroll service company as it may considerably limit the employer’s capability to be notified of tax matters including their company.
– Electronic Funds Transfer (EFT) should be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll providers are using EFTPS, so the employers 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 occasionally confirm payments. A warning needs to increase the very first time a service company misses out on a payment or makes a late payment. When an employer registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS permits employers to make any extra tax payments that their third-party provider 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 actually stolen funds meant for payment of employment taxes.

EFTPS is a protected, accurate, and simple to use service that supplies an immediate confirmation for each deal. This service is used free 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 web or by phone. To learn more, employers can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to talk with a client service representative.

Remember, employers are responsible for the payment of income tax withheld and of both the employer and staff member portions of social security and Medicare taxes.

Employers who think that a costs or notification gotten is a result of a problem with their payroll service company must get in touch with the IRS as soon as possible by calling the number on the costs, composing to the IRS workplace that sent the bill, calling 800-829-4933 or visiting a regional IRS office. For more details about IRS notices, expenses and payment alternatives, describe Publication 594, The IRS Collection Process PDF.