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

Many employers contract out some or all their payroll and related tax tasks to third-party payroll service suppliers. Third-party payroll service providers can enhance business operations and assist fulfill 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 company offers the funds initially to the third-party.
- Reporting, collecting and depositing work taxes with state and federal authorities.

Employers who outsource some or all their payroll responsibilities ought to think about the following:

- The company is eventually accountable for the deposit and payment of federal tax liabilities. Although the company may forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable party. If the third-party stops working to make the federal tax payments, then the IRS might assess penalties and interest on the company's account. The employer is accountable for all taxes, charges and interest due. The employer may also be held personally accountable for certain unpaid federal taxes.
- If there are any concerns with an account, then the IRS will send out correspondence to the employer at the address of record. The IRS highly recommends that the company does not change their address of record to that of the payroll service company as it might considerably restrict the employer's ability to be notified of tax matters involving their service.
- Electronic Funds Transfer (EFT) need to be utilized to deposit all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll suppliers are using EFTPS, so the employers can confirm that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and utilize this PIN to periodically validate payments. A red flag must the first time a provider misses a payment or makes a late payment. When a company signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables companies to make any extra tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have been prosecutions of people and companies, who acting under the look of a payroll service provider, have taken funds meant for payment of employment taxes.

EFTPS is a secure, accurate, and simple to utilize service that offers an instant verification for each deal. This service is provided complimentary of charge from the U.S. Department of Treasury and allows employers to make and verify federal tax payments electronically 24 hours a day, 7 days a week through the web or by phone. For more details, companies can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration form or to speak with a client service agent.

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

Employers who think that a costs or notice received is an outcome of a problem with their payroll provider ought to call the IRS as soon as possible by calling the number on the costs, composing to the IRS office that sent the bill, calling 800-829-4933 or checking out a regional IRS office. For more details about IRS notifications, costs and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.