Outsourcing payroll responsibilities can be a sound company practice, however ... Know your tax obligations as a company

Many companies contract out some or all their payroll and associated tax responsibilities to third-party payroll company. Third-party payroll provider can improve company operations and help satisfy filing due dates and deposit requirements. Some of the services they provide are:

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

Employers who outsource some or all their payroll duties need to consider the following:

- The employer is eventually responsible for the deposit and payment of federal tax liabilities. Even though the company 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 examine penalties and interest on the employer's account. The employer is responsible for all taxes, charges and interest due. The employer may likewise be held personally liable for certain overdue federal taxes.
- If there are any problems with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly suggests that the employer does not alter their address of record to that of the payroll company as it might significantly restrict the employer's ability to be informed of tax matters involving their company.
- Electronic Funds (EFT) should be utilized to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll providers are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and use this PIN to periodically validate payments. A warning should increase the first time a service supplier misses out on a payment or makes a late payment. When an employer signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra 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 provider, have actually stolen funds meant for payment of employment taxes.

EFTPS is a safe, precise, and easy to use service that provides an immediate verification for each transaction. This service is offered free of charge from the U.S. Department of Treasury and allows employers to make and confirm federal tax payments digitally 24 hr a day, 7 days a week through the internet or by phone. For more details, companies can register online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for an enrollment form or to speak to a customer care representative.

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

Employers who believe that a costs or notice gotten is an outcome of an issue with their payroll company must call the IRS as quickly as possible by calling the number on the costs, writing to the IRS workplace that sent the expense, calling 800-829-4933 or visiting a regional IRS office. For additional information about IRS notifications, expenses and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.