Outsourcing Payroll Duties

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

Many employers outsource some or all their payroll and related tax duties to third-party payroll provider. Third-party payroll provider can improve organization operations and help satisfy filing deadlines and deposit requirements. Some of the services they provide are:

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

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

– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the employer may 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 charges and interest on the company’s account. The company is responsible for all taxes, charges and interest due. The employer might also 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 suggests that the company does not alter their address of record to that of the payroll provider as it might significantly limit the company’s capability to be informed of tax matters including their organization.
– Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll service providers are utilizing EFTPS, so the employers can validate that payments are being made on their behalf. Employers need to sign up on the EFTPS system to get their own PIN and use this PIN to regularly confirm payments. A red flag should increase the very first time a company misses out on a payment or makes a late payment. When an employer registers on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits employers to make any additional tax payments that their third-party service provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of individuals and companies, who acting under the look of a payroll provider, have taken funds meant for payment of work taxes.

EFTPS is a safe, accurate, and easy to utilize service that offers an instant verification for each deal. This service is used free of charge from the U.S. Department of Treasury and allows employers to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. To find out more, employers can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration type or to speak with a customer support agent.

Remember, companies are eventually responsible for the payment of earnings tax withheld and of both the company and staff member parts of social security and Medicare taxes.

Employers who think that a costs or notice received is a result of an issue with their payroll service provider should call the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent the costs, calling 800-829-4933 or checking out a regional IRS workplace. To find out more about IRS notices, expenses and payment options, describe Publication 594, The Process PDF.