Outsourcing payroll responsibilities can be a sound business practice, but ... Know your tax responsibilities as an employer

Many employers outsource some or all their payroll and related tax duties to third-party payroll service suppliers. Third-party payroll provider can streamline service operations and help meet filing deadlines and deposit requirements. Some of the services they offer are:

- Administering payroll and employment taxes on behalf of the company where the employer supplies the funds at first to the third-party.
- Reporting, gathering and transferring employment taxes with state and federal authorities.

Employers who outsource some or all their payroll duties must consider the following:

- The company is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable party. If the third-party fails to make the federal tax payments, then the IRS may assess charges and interest on the company's account. The company is liable for all taxes, charges and interest due. The employer may likewise be held personally responsible for certain unsettled 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 highly recommends that the company does not change their address of record to that of the payroll company as it may substantially restrict the company's capability to be notified of tax matters involving their organization.
- Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll providers are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and utilize this PIN to occasionally confirm payments. A red flag ought to increase the very first time a service company misses a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables employers to make any additional tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have actually been prosecutions of people and companies, who acting under the look of a payroll service supplier, have actually taken funds intended for payment of employment taxes.

EFTPS is a protected, accurate, and simple to utilize service that provides an immediate confirmation for each deal. This service is offered complimentary 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 web or by phone. For more info, companies can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for an enrollment form or to consult with a client service representative.

Remember, employers are ultimately accountable for the payment of earnings tax kept and of both the company and staff member parts of social security and Medicare taxes.

Employers who believe that an expense or notification gotten is a result of a problem with their payroll provider must contact the IRS as quickly as possible by calling the number on the bill, writing to the IRS office that sent the bill, calling 800-829-4933 or going to a local IRS office. For additional information about IRS notifications, costs and payment choices, describe Publication 594, The IRS Collection Process PDF.