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Outsourcing payroll duties can be a sound business practice, but ... Know your tax responsibilities as an employer

Many companies contract out some or all their payroll and related tax duties to third-party payroll provider. Third-party payroll provider can simplify company operations and help meet 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 employer supplies the funds at first to the third-party.

Reporting, collecting and transferring employment taxes with state and federal authorities.

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

- The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company may forward the tax amounts to the third-party to make the tax deposits, the employer is the accountable party. If the third-party fails to make the federal tax payments, then the IRS may assess penalties and interest on the company's account. The employer is responsible for all taxes, penalties and interest due. The company might also be held personally responsible for particular overdue federal taxes.
If there are any issues with an account, then the IRS will send correspondence to the employer at the address of record. The IRS strongly suggests that the employer does not change their address of record to that of the payroll service provider as it might significantly restrict the employer's capability to be informed of tax matters including their organization.
Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll suppliers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and this PIN to periodically validate payments. A red flag should go up the first time a service provider misses a payment or makes a late payment. When an employer registers 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 approximated tax payments. There have actually been prosecutions of people and companies, who acting under the appearance of a payroll service provider, have stolen funds intended for payment of work taxes.

EFTPS is a safe and secure, accurate, and simple to utilize service that provides an immediate verification for each transaction. This service is offered totally free of charge from the U.S. Department of Treasury and permits companies to make and verify federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. For more info, employers can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration kind or to talk with a customer care agent.

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

Employers who think that a costs or notification gotten is a result of an issue with their payroll service provider need to get in touch with the IRS as quickly as possible by calling the number on the expense, writing to the IRS office that sent the expense, calling 800-829-4933 or visiting a regional IRS office. To find out more about IRS notifications, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.