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

Many companies outsource some or all their payroll and associated tax tasks to third-party payroll service suppliers. Third-party payroll company can enhance business operations and assist meet filing due dates and deposit requirements. A few of the services they offer are:

- Administering payroll and work taxes on behalf of the employer where the employer offers the funds at first 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 must think about the following:

- The company is ultimately accountable for the deposit and payment of federal tax liabilities. Despite the fact that 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 stops working to make the federal tax payments, then the IRS might examine charges and interest on the employer's account. The employer is accountable for all taxes, charges and interest due. The employer may also be held personally responsible for particular unpaid federal taxes.
- If there are any issues 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 service company as it might considerably restrict the employer's ability to be notified of tax matters involving their business.
- Electronic Funds Transfer (EFT) must be utilized to transfer all federal tax deposits. Generally, an EFT is made utilizing Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll companies are utilizing EFTPS, so the employers can validate 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 service company 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 employers to make any extra tax payments that their third-party supplier is not making on their behalf such as estimated tax payments. There have been prosecutions of individuals and companies, who acting under the look of a payroll service supplier, have actually taken funds meant for payment of employment taxes.

EFTPS is a safe, precise, and simple to use service that provides an instant verification for each deal. This service is used free of charge from the U.S. Department of Treasury and allows companies to make and confirm federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more info, employers can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to speak to a client service representative.

Remember, employers are eventually 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 an expense or notice received is a result of an issue with their payroll service company need to get in touch with the IRS as quickly as possible by calling the number on the bill, composing to the IRS office that sent the expense, calling 800-829-4933 or visiting a local IRS office. For information about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.