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

Many employers outsource some or all their payroll and related tax responsibilities to third-party payroll provider. Third-party payroll company can enhance company operations and assist meet filing due dates and deposit requirements. Some of the services they provide are:

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

Employers who contract out some or all their payroll obligations should think about the following:

- The employer is eventually accountable for the deposit and payment of federal tax liabilities. Despite the fact that the employer might forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible party. If the third-party stops working to make the federal tax payments, then the IRS may evaluate penalties and interest on the company's account. The company is responsible for all taxes, charges and interest due. The company might also be held personally liable for certain overdue 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 strongly recommends that the employer does not change their address of record to that of the payroll provider as it might considerably restrict the company's capability to be notified of tax matters involving their service.
- Electronic Funds Transfer (EFT) need to be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll service providers are using EFTPS, so the companies can verify that payments are being made on their behalf. Employers need to on the EFTPS system to get their own PIN and utilize this PIN to occasionally confirm payments. A red flag ought to go up the first time a service company misses 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 allows employers to make any extra tax payments that their third-party provider is not making on their behalf such as estimated tax payments. There have actually been prosecutions of individuals and companies, who acting under the look of a payroll provider, have actually taken funds meant for payment of employment taxes.

EFTPS is a protected, accurate, and simple to use service that supplies an immediate confirmation for each transaction. This service is provided complimentary of charge from the U.S. Department of Treasury and enables companies to make and verify federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. For additional information, companies can register online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration kind or to talk to a client service agent.

Remember, companies are ultimately responsible 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 an expense or notice received is a result of an issue with their payroll provider must call the IRS as soon as possible by calling the number on the expense, writing to the IRS office that sent out the expense, calling 800-829-4933 or going to a local IRS office. For additional information about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.