Outsourcing payroll duties can be a sound service practice, however ... Know your tax duties as a company

Many companies outsource some or all their payroll and associated tax duties to third-party payroll company. Third-party payroll service suppliers can simplify business operations and assist satisfy filing deadlines and deposit requirements. A few of the services they supply are:

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

Employers who contract out some or all their payroll duties need to consider the following:

- The employer is eventually accountable for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible party. If the third-party fails to make the federal tax payments, then the IRS might assess penalties and interest on the employer's account. The company is responsible for all taxes, charges and interest due. The employer might likewise be held personally liable for certain unsettled federal taxes.
- If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS highly suggests that the company does not change their address of record to that of the payroll company as it might substantially limit the employer's ability to be notified of tax matters involving 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 must guarantee their payroll service providers are using EFTPS, so the companies can confirm that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and utilize this PIN to periodically confirm payments. A warning ought to increase 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 on-line access to their payment history for 16 months. In addition, EFTPS allows companies to make any additional tax payments that their third-party company is not making on their behalf such as estimated tax payments. There have actually been prosecutions of individuals and business, who acting under the look of a payroll provider, have stolen funds planned for payment of work taxes.

EFTPS is a safe, accurate, and simple to utilize service that offers an immediate confirmation for each transaction. This service is offered complimentary of charge from the U.S. Department of Treasury and permits employers to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the web or by phone. For additional information, employers can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration type or to talk to a consumer service representative.

Remember, employers are ultimately responsible for the payment of income tax kept and of both the employer and employee portions of social security and Medicare taxes.

Employers who think that a bill or notification gotten is a result of an issue 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 the expense, calling 800-829-4933 or going to a local IRS workplace. To find out more about IRS notices, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.