Outsourcing Payroll Duties
Outsourcing payroll tasks can be a sound company practice, but ... Know your tax obligations as an employer
Many companies outsource some or all their payroll and associated tax duties to third-party payroll company. Third-party payroll service suppliers can enhance service operations and assist meet filing due dates and deposit requirements. Some of the services they supply are:
- Administering payroll and employment taxes on behalf of the employer where the company offers the funds initially to the .
- Reporting, gathering and transferring employment taxes with state and federal authorities.
Employers who contract out some or all their payroll responsibilities must think about the following:
- The company is ultimately accountable for the deposit and payment of federal tax liabilities. Although the company might forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible party. If the third-party stops working to make the federal tax payments, then the IRS might assess charges and interest on the company's account. The company is responsible for all taxes, charges and interest due. The company may also be held personally accountable for particular unsettled 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 alter their address of record to that of the payroll provider as it may substantially limit the employer's ability to be notified of tax matters including their organization.
- Electronic Funds Transfer (EFT) must be utilized to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll service providers are utilizing 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 regularly confirm payments. A warning should 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 allows companies to make any extra tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have been prosecutions of people and business, who acting under the look of a payroll company, have taken funds meant for payment of employment taxes.
EFTPS is a safe, precise, and easy to use service that supplies an immediate confirmation for each deal. This service is provided free of charge from the U.S. Department of Treasury and allows companies to make and verify federal tax payments electronically 24 hr 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 Client service at 800-555-4477 for an enrollment form or to speak with a client service representative.
Remember, companies are eventually accountable for the payment of earnings tax withheld and of both the employer and staff member portions of social security and Medicare taxes.
Employers who believe that an expense or notification received is an outcome of a problem with their payroll provider must get in touch with the IRS as soon as possible by calling the number on the expense, composing to the IRS office that sent the costs, calling 800-829-4933 or going to a local IRS office. For more info about IRS notifications, expenses and payment choices, describe Publication 594, The IRS Collection Process PDF.
