Outsourcing Payroll Duties

Outsourcing payroll duties can be a sound organization practice, but ... Know your tax obligations as a company


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


- Administering payroll and work taxes on behalf of the employer where the employer supplies the funds at first 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 need to think about the following:


- The employer is eventually responsible for the deposit and payment of federal tax liabilities. Despite the fact that the employer might forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party stops working to make the federal tax payments, then the IRS may assess charges and interest on the employer's account. The employer is accountable for all taxes, charges and interest due. The employer may likewise be held personally accountable for particular unpaid federal taxes.
- If there are any problems with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly suggests that the company does not alter their address of record to that of the payroll company as it may substantially limit the employer's capability to be notified of tax matters including their organization.
- Electronic Funds Transfer (EFT) should be used to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll providers are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers must sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally validate payments. A warning must go up the very first time a company 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 supplier is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and companies, who acting under the look of a payroll provider, have stolen funds planned for payment of employment taxes.


EFTPS is a safe, accurate, and simple to use service that supplies an instant confirmation for each transaction. This service is offered complimentary of charge from the U.S. Department of Treasury and allows employers to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the web or by phone. To learn more, employers can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment kind or to consult with a customer service agent.


Remember, are ultimately accountable for the payment of income tax withheld and of both the employer and staff member portions of social security and Medicare taxes.


Employers who think that a costs or notification received is a result of an issue with their payroll company need to contact the IRS as quickly as possible by calling the number on the expense, composing to the IRS workplace that sent the bill, calling 800-829-4933 or going to a regional IRS workplace. For more details about IRS notifications, costs and payment alternatives, describe Publication 594, The IRS Collection Process PDF.