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

Many employers outsource some or all their payroll and associated tax duties to third-party payroll provider. Third-party payroll company can simplify company operations and help satisfy filing due dates and deposit requirements. Some of the services they provide are:

- Administering payroll and work taxes on behalf of the company where the company provides the funds at first to the third-party.

- Reporting, collecting and transferring employment taxes with state and federal authorities.

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

- The company is eventually responsible 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 employer is the accountable celebration. If the third-party fails to make the federal tax payments, then the IRS may assess charges and interest on the company's account. The company is liable for all taxes, penalties and interest due. The company may also be held personally responsible for specific unsettled federal taxes.

- If there are any problems 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 considerably limit the company's ability to be notified of tax matters including their business.

- Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers should ensure their payroll suppliers are utilizing EFTPS, so the companies can verify that payments are being made on their behalf. Employers ought to register on the EFTPS system to get their own PIN and utilize this PIN to periodically validate payments. A red flag needs to increase the very first time a provider misses a payment or makes a late payment. When an employer signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows companies to make any extra 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 companies, who acting under the appearance of a payroll provider, have taken funds planned for of employment taxes.

EFTPS is a protected, accurate, and simple to utilize service that provides an instant confirmation for each transaction. This service is provided complimentary of charge from the U.S. Department of Treasury and allows employers to make and verify federal tax payments digitally 24 hr a day, 7 days a week through the web or by phone. To find out more, employers can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for a registration form or to speak to a customer service representative.

Remember, employers are ultimately responsible for the payment of income tax kept and of both the employer and staff member portions of social security and Medicare taxes.

Employers who think that a bill or notification gotten is an outcome of an issue with their payroll provider should contact the IRS as quickly as possible by calling the number on the bill, composing to the IRS workplace that sent out the bill, calling 800-829-4933 or going to a regional IRS workplace. For more details about IRS notifications, costs and payment options, describe Publication 594, The IRS Collection Process PDF.