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

Many companies outsource some or all their payroll and related tax tasks to third-party payroll company. Third-party payroll provider can simplify organization operations and assist meet filing due dates and deposit requirements. Some of the services they supply are:

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

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

- The employer is eventually accountable for the deposit and payment of federal tax liabilities. Although the employer may forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS may assess charges and interest on the employer's account. The company is responsible for all taxes, charges and interest due. The employer may likewise be held personally accountable for particular unpaid federal taxes.
- If there are any issues with an account, then the IRS will send 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 service provider as it may significantly restrict the company's capability to be notified of tax matters including their company.
- 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 should ensure their payroll suppliers are using EFTPS, so the employers can verify that payments are being made on their behalf. Employers ought to sign up on the EFTPS system to get their own PIN and utilize this PIN to occasionally verify payments. A warning should increase the very first time a company misses out on 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 enables 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 people and companies, who acting under the look of a payroll company, have taken funds intended for payment of employment taxes.

EFTPS is a safe and secure, accurate, and simple to use service that offers an instant confirmation for each transaction. This service is provided free of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. To learn more, employers can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment type or to speak with a client service representative.

Remember, companies are eventually accountable for the payment of income tax kept and of both the company and staff member portions of social security and Medicare taxes.

Employers who think that a bill or notice received is an outcome of an issue with their payroll company should call the IRS as soon as possible by calling the number on the bill, writing to the IRS workplace that sent out the bill, calling 800-829-4933 or going to a local IRS office. To find out more about IRS notices, expenses and payment alternatives, describe Publication 594, The IRS Collection Process PDF.