Outsourcing payroll tasks can be a sound organization practice, however ... Know your tax duties as an employer

Many companies contract out some or all their payroll and related tax tasks to third-party payroll service companies. Third-party payroll service companies can streamline service operations and assist satisfy filing deadlines and deposit requirements. A few of the services they offer are:

- Administering payroll and work taxes on behalf of the company where the employer provides the funds initially to the third-party.
- Reporting, collecting and transferring work taxes with state and federal authorities.

Employers who contract out some or all their payroll obligations should think about the following:

- The company is eventually responsible for the deposit and payment of federal tax liabilities. Even though the company may 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 liable for all taxes, charges and interest due. The company may likewise be held personally responsible for specific unpaid federal taxes.
- If there are any concerns with an account, then the IRS will send out correspondence to the company at the address of record. The IRS strongly suggests that the company does not alter their address of record to that of the payroll service supplier as it may significantly restrict the employer's capability to be notified of tax matters including their service.
- Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll service providers are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and utilize this PIN to periodically validate payments. A red flag should increase the very first time a service company 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 companies to make any extra tax payments that their third-party provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of people and business, who acting under the appearance of a payroll service supplier, have taken funds meant for payment of work taxes.

EFTPS is a safe, accurate, and easy to use service that offers an instant confirmation for each transaction. This service is offered free of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more info, employers can enroll online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment type or to consult with a consumer service agent.

Remember, employers are eventually accountable for the payment of income tax kept and of both the company 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 company ought to call the IRS as quickly as possible by calling the number on the expense, writing to the IRS workplace that sent out the costs, calling 800-829-4933 or visiting a local IRS workplace. For more details about IRS notifications, expenses and payment choices, describe Publication 594, The IRS Collection Process PDF.