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

Many companies outsource some or all their payroll and related tax duties to third-party payroll service providers. Third-party payroll service providers can improve organization operations and assist fulfill filing deadlines 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 initially to the third-party.
- Reporting, collecting and transferring work taxes with state and federal authorities.

Employers who contract out some or all their payroll responsibilities need to think about the following:

- The employer is ultimately responsible 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 party. If the third-party fails to make the federal tax payments, then the IRS might assess penalties and interest on the company's account. The company is responsible for all taxes, charges and interest due. The employer might also be held personally responsible for certain unsettled 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 recommends that the company does not alter their address of record to that of the payroll service company as it may considerably restrict the company's capability to be notified of tax matters involving their service.
- Electronic Funds Transfer (EFT) should be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll providers are utilizing EFTPS, so the employers can verify that payments are being made on their behalf. Employers ought to 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 provider misses out on a payment or makes a late payment. When an employer signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS enables 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 people and companies, who acting under the appearance of a payroll provider, have stolen funds meant for payment of work taxes.

EFTPS is a safe, precise, and easy to use service that provides an immediate verification for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and enables companies to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. To learn more, companies can enlist online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration kind or to speak with a customer support agent.

Remember, companies are eventually accountable for the payment of earnings tax kept and of both the employer and worker portions of social security and Medicare taxes.

Employers who think that a costs or notice gotten is a result of a problem with their payroll service company should call the IRS as quickly as possible by the number on the bill, writing to the IRS workplace that sent out the bill, calling 800-829-4933 or visiting a regional IRS workplace. For additional information about IRS notices, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.