Outsourcing payroll tasks can be a sound organization practice, but ... Know your tax responsibilities as a company
Many companies outsource some or all their payroll and associated tax duties to third-party payroll service companies. Third-party payroll provider can enhance organization operations and help satisfy filing due dates and deposit requirements. A few of the services they supply are:
- Administering payroll and work taxes on behalf of the company where the company provides the funds initially to the third-party.
- Reporting, collecting and transferring work taxes with state and federal authorities.
Employers who outsource some or all their payroll duties should think about the following:
- The company is eventually responsible for the deposit and payment of federal tax liabilities. Although the company might forward the tax amounts 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 may evaluate charges and interest on the company's account. The company is accountable for all taxes, penalties and interest due. The employer might likewise be held personally responsible for certain unsettled 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 highly recommends that the employer does not alter their address of record to that of the payroll provider as it may significantly restrict the employer's capability to be notified of tax matters including their organization.
- 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 ought to ensure their payroll providers are using EFTPS, so the companies can verify that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and utilize this PIN to periodically verify payments. A red flag should go up the first time a service supplier misses out on a payment or makes a late payment. When an employer 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 service provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of individuals and business, who acting under the appearance of a payroll company, have taken funds intended for payment of work taxes.
EFTPS is a safe and secure, accurate, and simple to utilize service that supplies an immediate verification for each transaction. This service is provided free of charge from the U.S. Department of Treasury and permits companies to make and verify federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For additional information, companies can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to consult with a customer care agent.
Remember, companies are ultimately responsible for the payment of income tax kept and of both the employer and staff member portions of social security and Medicare taxes.
Employers who believe that a costs or notification gotten is a result of a problem with their payroll service provider need to get in touch with the IRS as soon as possible by calling the number on the expense, composing to the IRS workplace that sent the expense, calling 800-829-4933 or going to a local IRS workplace. To find out more about IRS notices, costs and payment options, refer to Publication 594, The IRS Collection Process PDF.
