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

Many companies contract out some or all their payroll and associated tax responsibilities to third-party payroll provider. Third-party payroll company can simplify company operations and help meet filing due dates and deposit requirements. A few of the services they offer are:

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

Employers who outsource some or all their payroll responsibilities must think about the following:

- The company is ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the company might forward the tax amounts to the third-party to make the tax deposits, the company is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS may examine charges and interest on the employer's account. The company is accountable for all taxes, penalties and interest due. The employer might also 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 recommends that the company does not alter their address of record to that of the payroll service supplier as it might considerably limit the employer's capability to be notified of tax matters including their business.
- Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their payroll suppliers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers need to sign up on the EFTPS system to get their own PIN and use this PIN to regularly validate payments. A red flag must increase the very first time a service provider misses 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 employers to make any extra tax payments that their third-party service provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the look of a payroll provider, have actually stolen funds planned for payment of work taxes.

EFTPS is a protected, accurate, and easy to utilize service that supplies an immediate confirmation for each deal. 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 hr a day, 7 days a week through the web or by phone. For more details, employers can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to talk with a customer service agent.

Remember, employers are ultimately responsible 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 a costs or notice received is a result of a problem with their payroll provider should get in touch with the IRS as quickly as possible by calling the number on the expense, writing to the IRS office that sent out the costs, calling 800-829-4933 or going to a regional IRS office. For more info about IRS notifications, expenses and payment choices, describe Publication 594, The IRS Collection Process PDF.