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

Many companies contract out some or all their payroll and related tax responsibilities to third-party payroll company. Third-party payroll service companies can improve service 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 company where the company provides the funds at first to the third-party.
- Reporting, gathering and transferring employment taxes with state and federal authorities.

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

- The company is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the company may forward the tax amounts to the third-party to make the tax deposits, the company is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS may evaluate penalties and interest on the employer's account. The company is liable for all taxes, penalties and interest due. The company might likewise be held personally liable for specific unsettled federal taxes.
- If there are any issues with an account, then the IRS will send correspondence to the employer 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 significantly limit the employer's ability to be notified of tax matters involving their business.
- Electronic Funds Transfer (EFT) should be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers must ensure their payroll suppliers are utilizing EFTPS, so the employers can validate that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and utilize this PIN to regularly confirm payments. A red flag should increase the first time a service company misses a payment or makes a late payment. When a company registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables employers to make any additional that their third-party company is not making on their behalf such as estimated tax payments. There have been prosecutions of people and business, who acting under the look of a payroll provider, have taken funds intended for payment of employment taxes.

EFTPS is a secure, accurate, and simple to use service that supplies an immediate confirmation for each transaction. This service is offered totally free of charge from the U.S. Department of Treasury and permits employers to make and confirm federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. To learn more, employers can register online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to talk to a client service representative.

Remember, companies are ultimately accountable for the payment of income tax kept and of both the employer and worker 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 service company should get in touch with the IRS as soon as possible by calling the number on the expense, composing to the IRS office that sent the expense, calling 800-829-4933 or checking out a local IRS office. To learn more about IRS notices, expenses and payment options, refer to Publication 594, The IRS Collection Process PDF.