Outsourcing Payroll Duties

Outsourcing payroll duties can be a sound business practice, but … Know your tax obligations as a company
Many companies contract out some or all their payroll and associated tax responsibilities to third-party payroll company. Third-party payroll provider can simplify service operations and help meet filing due dates and deposit requirements. A few of the services they supply are:
– Administering payroll and work taxes on behalf of the company where the company provides the funds initially to the third-party.
– Reporting, collecting and transferring work taxes with state and federal authorities.
Employers who contract out some or all their payroll obligations ought to consider the following:
– The company is eventually accountable for the deposit and payment of federal tax liabilities. Although the company may forward the tax totals up to the third-party to make the tax deposits, the company is the responsible celebration. If the third-party stops working to make the federal tax payments, then the IRS may examine charges and interest on the employer’s account. The company is liable for all taxes, penalties and interest due. The company might also be held personally accountable for specific 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 highly recommends that the company does not change their address of record to that of the payroll company as it may considerably limit the employer’s ability to be notified of tax matters involving their service.
– Electronic Funds Transfer (EFT) must be used to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll suppliers are using EFTPS, so the companies can confirm 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 periodically verify payments. A warning needs to go up the very first time a provider misses 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 allows companies to make any additional 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 taken funds intended for payment of work taxes.
EFTPS is a protected, precise, and simple to utilize service that offers an immediate verification for each deal. This service is used complimentary of charge from the U.S. Department of Treasury and enables companies to make and federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For more information, employers can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment form or to speak to a customer support agent.
Remember, employers are ultimately accountable for the payment of earnings tax kept and of both the employer and staff member parts of social security and Medicare taxes.
Employers who believe that an expense or notification gotten is a result of an issue with their payroll company ought to get in touch with the IRS as quickly as possible by calling the number on the costs, writing to the IRS workplace that sent out the bill, calling 800-829-4933 or going to a regional IRS workplace. To find out more about IRS notifications, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.