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

Many companies outsource some or all their payroll and associated tax duties to third-party payroll service companies. Third-party payroll company can streamline business operations and help satisfy filing due dates and deposit requirements. Some of the services they provide are:

- Administering payroll and employment taxes on behalf of the company where the employer provides 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 obligations ought to consider the following:

- The employer is ultimately accountable 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 celebration. If the third-party stops working to make the federal tax payments, then the IRS may examine penalties and interest on the company's account. The employer is accountable for all taxes, charges and interest due. The company may also be held personally accountable for specific overdue 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 employer does not alter their address of record to that of the payroll service as it might substantially limit the employer's ability to be notified of tax matters involving their company.
- Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers must guarantee their payroll providers are using EFTPS, so the employers can verify 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 periodically verify payments. A warning must go up the very first time a provider misses a payment or makes a late payment. When an employer registers on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits employers to make any additional 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 look of a payroll provider, have actually taken funds meant for payment of employment taxes.

EFTPS is a safe, accurate, and easy to utilize service that provides an instant verification for each transaction. This service is offered free of charge from the U.S. Department of Treasury and permits employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more information, employers can enlist online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration type or to talk with a customer service agent.

Remember, employers are ultimately accountable for the payment of earnings tax withheld and of both the employer and employee parts of social security and Medicare taxes.

Employers who believe that a bill or notification received is a result of an issue with their payroll provider ought to call the IRS as quickly as possible by calling the number on the costs, composing to the IRS workplace that sent the bill, calling 800-829-4933 or going to a local IRS office. To learn more about IRS notifications, costs and payment choices, refer to Publication 594, The IRS Collection Process PDF.