Outsourcing Payroll Duties

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

Many companies outsource some or all their payroll and associated tax duties to third-party payroll provider. Third-party payroll service providers can enhance organization operations and assist meet filing deadlines and deposit requirements. A few of the services they supply are:

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

Employers who outsource some or all their payroll responsibilities must consider the following:

– The company is ultimately responsible 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 responsible party. If the third-party stops working to make the federal tax payments, then the IRS might evaluate charges and interest on the company’s account. The employer is accountable for all taxes, penalties and interest due. The company might also be held personally accountable for certain unsettled federal taxes.

– If there are any problems with an account, then the IRS will send correspondence to the employer at the address of record. The IRS strongly recommends that the employer does not alter their address of record to that of the payroll provider as it may substantially limit the employer’s capability to be informed of tax matters involving their company.

– Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll service providers are utilizing 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 use this PIN to periodically validate payments. A red flag ought to go up the first time a provider misses out on 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 companies to make any extra tax payments that their third-party service provider is not making on their behalf such as estimated tax payments. There have been prosecutions of people and business, who acting under the appearance of a payroll service company, have actually taken funds planned for payment of employment taxes.

EFTPS is a protected, precise, and easy to utilize service that supplies an immediate verification for each transaction. This is offered 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 internet or by phone. To find out more, employers can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration form or to consult with a client service representative.

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

Employers who think that a bill or notice received is an outcome of an issue with their payroll service provider should contact the IRS as soon as possible by calling the number on the costs, writing to the IRS workplace that sent the bill, calling 800-829-4933 or going to a local IRS office. For additional information about IRS notifications, costs and payment alternatives, describe Publication 594, The IRS Collection Process PDF.

Here’s more information in regards to staff visit our page.