Outsourcing Payroll Duties
Outsourcing payroll duties can be a sound company practice, but … Know your tax responsibilities as an employer
Many employers contract out some or all their payroll and related tax responsibilities to third-party payroll provider. Third-party payroll company can improve company operations and help meet filing due dates and deposit requirements. A few of the services they provide are:
– Administering payroll and employment taxes on behalf of the employer where the company supplies the funds initially to the third-party.
– Reporting, gathering and depositing work taxes with state and federal authorities.
Employers who outsource some or all their payroll duties ought to think about the following:
– The employer is ultimately accountable for the deposit and payment of federal tax liabilities. Although the company might forward the tax totals up to the third-party to make the tax deposits, the company is the responsible party. If the third-party stops working to make the federal tax payments, then the IRS might examine penalties and interest on the company’s account. The company is accountable for all taxes, penalties and interest due. The company might likewise be held personally accountable for specific unsettled federal taxes.
– If there are any issues with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly recommends that the employer does not change their address of record to that of the payroll company as it may significantly limit the company’s ability to be informed of tax matters including their business.
– Electronic Funds (EFT) should be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll companies are utilizing EFTPS, so the companies can validate that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and use this PIN to periodically verify payments. A warning should increase the very first time a company misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS enables 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 prosecutions of people and companies, who acting under the appearance of a payroll company, have actually stolen funds intended for payment of employment taxes.
EFTPS is a secure, accurate, and simple to use service that offers an instant verification for each deal. This service is used complimentary of charge from the U.S. Department of Treasury and permits companies to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. For more details, companies can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration form or to consult with a consumer service representative.
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 bill or notice gotten is a result of a problem with their payroll company need to contact the IRS as soon as possible by calling the number on the bill, writing to the IRS workplace that sent the costs, calling 800-829-4933 or visiting a local IRS office. For more details about IRS notifications, expenses and payment choices, refer to Publication 594, The IRS Collection Process PDF.