Outsourcing Payroll Duties
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Outsourcing payroll tasks can be a sound service practice, however ... Know your tax responsibilities as an employer
Many companies contract out some or all their payroll and related tax responsibilities to third-party payroll service suppliers. Third-party payroll company can streamline service operations and assist 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 employer provides the funds initially to the third-party.
- Reporting, collecting and depositing employment taxes with state and federal authorities.
Employers who contract out some or all their payroll obligations must consider the following:
- The employer is eventually accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax amounts to the third-party to make the tax deposits, the company is the responsible celebration. If the third-party fails to make the federal tax payments, then the IRS might examine penalties and interest on the employer's account. The employer is responsible for all taxes, penalties and interest due. The company may likewise be held personally accountable for specific overdue 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 strongly recommends that the company does not change their address of record to that of the payroll service provider as it might considerably restrict the employer's ability to be informed of tax matters involving their organization.
- Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll providers are using EFTPS, so the employers can confirm that are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and utilize this PIN to periodically validate payments. A red flag needs to increase the very first time a company misses 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 employers to make any extra tax payments that their third-party supplier 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 service company, have actually stolen funds meant for payment of employment taxes.
EFTPS is a protected, precise, and easy to use service that supplies an immediate confirmation for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and permits companies to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. For additional information, employers can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration form or to speak with a client service representative.
Remember, employers are ultimately accountable for the payment of income tax withheld and of both the employer and staff member parts of social security and Medicare taxes.
Employers who believe that a bill or notice received is an outcome of an issue with their payroll service company must get in touch with the IRS as quickly as possible by calling the number on the costs, writing to the IRS office that sent the expense, calling 800-829-4933 or visiting a regional IRS office. For additional information about IRS notifications, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.
