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

Many employers contract out some or all their payroll and related tax tasks to third-party payroll provider. Third-party payroll provider can streamline business operations and help fulfill filing deadlines and deposit requirements. Some of the services they supply are:

- Administering payroll and employment taxes on behalf of the employer where the employer supplies the funds initially 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 should think about the following:

- The company is ultimately responsible for the deposit and payment of federal tax liabilities. Although the company might forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible celebration. If the third-party fails to make the federal tax payments, then the IRS might examine charges and interest on the company's account. The company is accountable for all taxes, charges and interest due. The company may likewise be held personally liable for particular unsettled 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 strongly suggests that the company does not alter their address of record to that of the payroll service supplier as it may significantly limit the company's ability to be informed of tax matters involving their business.
- Electronic Funds Transfer (EFT) should be used to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll providers are using EFTPS, so the employers can verify that payments are being made on their behalf. Employers must register on the EFTPS system to get their own PIN and use this PIN to periodically validate payments. A warning needs to increase the first time a company misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS enables employers to make any additional tax payments that their third-party provider is not making on their behalf such as approximated tax payments. There have actually been prosecutions of individuals and business, who acting under the appearance of a payroll company, have actually taken funds intended for payment of employment taxes.

EFTPS is a protected, accurate, and easy to utilize service that provides an immediate confirmation for each transaction. This service is offered free of charge from the U.S. Department of Treasury and enables employers to make and confirm federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. For more details, employers can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment form or to talk to a consumer service representative.

Remember, companies are ultimately accountable for the payment of income tax kept and of both the company and staff member portions of and Medicare taxes.

Employers who believe that a costs or notification gotten is an outcome of an issue with their payroll service supplier ought to get in touch with the IRS as soon as possible by calling the number on the bill, writing to the IRS office that sent the expense, calling 800-829-4933 or checking out a local IRS office. For more details about IRS notifications, bills and payment choices, describe Publication 594, The IRS Collection Process PDF.