Outsourcing Payroll Duties

Outsourcing payroll duties can be a sound business practice, however ... Know your tax duties as a company

Many companies outsource some or all their payroll and associated tax responsibilities to third-party payroll company. Third-party payroll service companies can streamline service operations and help satisfy filing due dates and deposit requirements. Some of the services they provide are:

- Administering payroll and work taxes on behalf of the company where the company provides 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 need to consider the following:

- The company is ultimately responsible 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 accountable celebration. If the third-party fails to make the federal tax payments, then the IRS might assess charges and interest on the employer's account. The company is liable for all taxes, penalties and interest due. The employer might likewise be held personally responsible for particular overdue federal taxes.
- If there are any issues with an account, then the IRS will send out correspondence to the company at the address of record. The IRS strongly suggests that the employer does not alter 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 including their service.
- Electronic Funds Transfer (EFT) must be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll providers are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and utilize this PIN to periodically confirm payments. A red flag ought to increase 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 employers to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have been of people and business, who acting under the look of a payroll service supplier, have stolen funds intended for payment of employment taxes.

EFTPS is a safe, accurate, and easy to use service that provides an instant confirmation for each deal. This service is used totally free of charge from the U.S. Department of Treasury and enables employers 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, companies can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment kind or to consult with a customer care representative.

Remember, employers are eventually accountable for the payment of income tax kept and of both the employer and staff member parts of social security and Medicare taxes.

Employers who think that a costs or notification gotten is an outcome of a problem with their payroll service provider must contact the IRS as quickly as possible by calling the number on the expense, writing to the IRS office that sent the costs, calling 800-829-4933 or going to a local IRS office. For additional information about IRS notifications, expenses and payment choices, refer to Publication 594, The IRS Collection Process PDF.