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

Many employers contract out some or all their payroll and associated tax duties to third-party payroll provider. Third-party payroll service providers can streamline service operations and assist meet filing deadlines and deposit requirements. Some of the services they offer are:

payroll and employment taxes on behalf of the employer where the employer offers the funds initially to the third-party.
- Reporting, collecting and depositing employment taxes with state and federal authorities.

Employers who outsource some or all their payroll duties ought to consider the following:

- The company is ultimately accountable for the deposit and payment of federal tax liabilities. Even though the company might forward the tax amounts to the third-party to make the tax deposits, the employer is the responsible party. 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 responsible for all taxes, charges and interest due. The company may likewise be held personally liable for specific overdue federal taxes.
- If there are any problems with an account, then the IRS will send correspondence to the company 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 company as it might considerably limit the employer's ability to be informed of tax matters involving their service.
- Electronic Funds Transfer (EFT) need to be utilized to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers should guarantee their payroll companies are utilizing 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 verify payments. A warning ought to increase the very first time a provider misses out on a payment or makes a late payment. When a company registers 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 provider is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and business, who acting under the appearance of a payroll company, have taken funds meant for payment of employment taxes.

EFTPS is a safe, precise, and simple to utilize service that supplies an instant verification for each deal. This service is used complimentary of charge from the U.S. Department of Treasury and enables employers to make and validate federal tax payments digitally 24 hours a day, 7 days a week through the internet or by phone. For more information, companies can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration form or to consult with a customer support representative.

Remember, companies are ultimately responsible 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 a bill or notice gotten is a result of a problem with their payroll service supplier should call the IRS as soon as possible by calling the number on the bill, writing to the IRS workplace that sent the costs, calling 800-829-4933 or going to a local IRS workplace. To find out more about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.