Outsourcing payroll duties can be a sound business practice, however … Know your tax responsibilities as an employer
Many companies outsource some or all their payroll and associated tax duties to third-party payroll company. Third-party payroll provider can simplify service operations and help meet filing deadlines and deposit requirements. Some of the services they supply are:
– Administering payroll and work taxes on behalf of the company where the employer provides the funds initially to the third-party.
– Reporting, gathering and depositing employment taxes with state and federal authorities.
Employers who outsource some or all their payroll obligations ought to consider the following:
– The company is ultimately responsible for the deposit and payment of federal tax liabilities. Although the employer might forward the tax amounts to the third-party to make the tax deposits, the company is the responsible celebration. If the third-party stops working to make the federal tax payments, then the IRS might evaluate penalties and interest on the employer’s account. The company is accountable for all taxes, charges and interest due. The employer may likewise be held personally liable for specific unpaid federal taxes.
– If there are any problems 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 alter their address of record to that of the payroll service provider as it may significantly limit the company’s ability to be informed of tax matters including their business.
– Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll companies are utilizing EFTPS, so the employers 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 occasionally confirm payments. A red flag needs to increase the first time a company misses out on a payment or makes a late payment. When a company registers on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS enables companies to make any extra tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and business, who acting under the look of a payroll service supplier, have actually taken funds meant for payment of employment taxes.
EFTPS is a safe and secure, precise, and easy to use service that provides an instant verification for each deal. This service is offered totally free of charge from the U.S. Department of Treasury and enables companies to make and validate federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. To find out more, employers can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment type or to talk with a client service representative.
Remember, companies are ultimately accountable for the payment of earnings tax withheld and of both the employer and staff member portions of social security and Medicare taxes.
who believe that a costs or notification received is a result of a problem with their payroll service supplier should get in touch with the IRS as quickly as possible by calling the number on the expense, composing to the IRS workplace that sent out the bill, calling 800-829-4933 or going to a regional IRS workplace. For more details about IRS notices, expenses and payment alternatives, describe Publication 594, The IRS Collection Process PDF.