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

Many employers contract out some or all their payroll and related tax duties to third-party payroll service companies. Third-party payroll service suppliers can enhance company operations and assist satisfy filing deadlines 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, gathering and depositing work taxes with state and federal authorities.

Employers who contract out some or all their payroll duties ought to think about the following:

- The employer is eventually accountable for the deposit and payment of federal tax liabilities. Although the company may 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 may assess charges and interest on the employer's account. The employer is responsible for all taxes, penalties and interest due. The employer may likewise be held personally liable for specific unpaid federal taxes.
- If there are any concerns 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 company as it might substantially restrict the employer's ability to be informed of tax matters including their company.
- Electronic Funds Transfer (EFT) need to be utilized to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll companies are using 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 this PIN to regularly validate payments. A warning should increase the first time a service provider 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 service provider is not making on their behalf such as approximated tax payments. There have been prosecutions of people and business, who acting under the look of a payroll provider, have stolen funds intended for payment of work taxes.

EFTPS is a safe, accurate, and easy to utilize service that offers an instant confirmation for each transaction. This service is offered free of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments electronically 24 hours a day, 7 days a week through the internet or by phone. For more info, employers can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment type or to speak with a customer care agent.

Remember, employers are eventually accountable for the payment of earnings tax kept and of both the company and staff member parts of social security and Medicare taxes.

Employers who believe that a costs or notice received is an outcome of an issue with their payroll service supplier must contact the IRS as quickly as possible by calling the number on the bill, writing to the IRS office that sent the bill, calling 800-829-4933 or visiting a local IRS office. For additional information about IRS notices, bills and payment options, refer to Publication 594, The IRS Collection Process PDF.