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

Many employers contract out some or all their payroll and related tax duties to third-party payroll company. Third-party payroll service companies can improve organization operations and assist meet filing deadlines and deposit requirements. Some of the services they provide are:

- Administering payroll and employment taxes on behalf of the company where the employer offers 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 obligations should consider the following:

- The company is ultimately responsible for the deposit and payment of federal tax liabilities. Despite the fact that the company may forward the tax totals up to the third-party to make the tax deposits, the employer is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS might evaluate charges and interest on the company's account. The company is liable for all taxes, penalties and interest due. The company might likewise be held personally accountable for specific unsettled 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 change their address of record to that of the payroll service provider as it might substantially restrict the company's ability to be notified of tax matters involving their company.

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 guarantee their payroll service providers are using 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 confirm payments. A red flag ought to go up the very first time a service provider 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 service 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 look of a payroll service provider, have stolen funds meant for payment of work taxes.

EFTPS is a protected, accurate, and easy to use service that supplies an immediate verification for each deal. This service is provided complimentary of charge from the U.S. Department of Treasury and allows companies to make and validate federal tax payments electronically 24 hr a day, 7 days a week through the web or by phone. To learn more, employers can register online at EFTPS.gov or call EFTPS Client service at 800-555-4477 for a registration form or to talk with a customer support representative.

Remember, companies are ultimately accountable for the payment of earnings tax withheld and of both the employer and staff member parts of social security and Medicare taxes.

Employers who think that an expense or notification gotten is a result of a problem with their payroll service supplier ought to contact the IRS as quickly as possible by calling the number on the bill, composing to the IRS workplace that sent the expense, calling 800-829-4933 or visiting a regional IRS office. To find out more about IRS notices, costs and payment choices, refer to Publication 594, The IRS Collection Process PDF.