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

Many employers outsource some or all their payroll and associated tax responsibilities to third-party payroll company. Third-party payroll company can improve service operations and help fulfill filing due dates and deposit requirements. A few of the services they supply are:

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

Employers who contract out some or all their payroll responsibilities ought to consider the following:

- The employer is eventually accountable for the deposit and payment of federal tax liabilities. Although the employer might forward the tax amounts to the third-party to make the tax deposits, the company is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS might examine penalties and interest on the employer's account. The employer is responsible for all taxes, charges and interest due. The employer might also be held personally responsible for particular unsettled federal taxes.
- If there are any problems with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS strongly suggests that the company does not change their address of record to that of the payroll provider as it might significantly restrict the company's ability to be notified of tax matters involving their organization.
- Electronic Funds Transfer (EFT) should 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 utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to occasionally confirm payments. A red flag ought to increase the very first time a service company misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS enables employers to make any additional 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 people and companies, who acting under the appearance of a payroll company, have stolen funds intended for payment of employment taxes.

EFTPS is a safe and secure, accurate, and simple to utilize service that offers an immediate confirmation for each transaction. This service is used totally free of charge from the U.S. Department of Treasury and allows 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 register online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration kind or to speak to a customer care agent.

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

Employers who believe that a costs or notification gotten is a result of an issue with their payroll service company should call the IRS as soon as possible by calling the number on the costs, composing to the IRS office that sent out the expense, calling 800-829-4933 or going to a local IRS workplace. To find out more about IRS notifications, costs and payment alternatives, describe Publication 594, The IRS Collection Process PDF.