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

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

- Administering payroll and employment taxes on behalf of the company where the employer provides the funds at first to the third-party.

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

Employers who contract out some or all their payroll obligations need to think about 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 company 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 company is accountable for all taxes, charges and interest due. The employer may likewise be held personally liable for particular unpaid federal taxes.
If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly recommends that the employer does not change their address of record to that of the payroll company as it may significantly limit the employer's capability to be informed of tax matters including their service.
Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll service providers are using EFTPS, so the companies can validate that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and use this PIN to regularly verify payments. A warning should go up the very first time a provider misses out on 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 company is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the look of a payroll provider, have stolen funds intended for payment of work taxes.

EFTPS is a protected, accurate, and simple to utilize service that supplies an immediate for each deal. This service is used totally free of charge from the U.S. Department of Treasury and enables employers to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For additional information, employers can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration kind or to talk to a customer care representative.

Remember, companies are eventually responsible for the payment of earnings tax withheld and of both the employer and staff member parts of social security and Medicare taxes.

Employers who think that an expense or notice gotten is an outcome of an issue with their payroll service provider need to call the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent the bill, calling 800-829-4933 or visiting a regional IRS office. To learn more about IRS notifications, costs and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.