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

Many employers outsource some or all their payroll and associated tax duties to third-party payroll company. Third-party payroll service companies can enhance service operations and assist meet filing deadlines and deposit requirements. Some of the services they offer are:

- Administering payroll and work taxes on behalf of the employer where the employer supplies the funds initially to the third-party.

- Reporting, gathering and depositing employment taxes with state and federal authorities.

Employers who outsource some or all their payroll obligations need to think about the following:

- The employer is eventually responsible for the deposit and payment of federal tax liabilities. Even though the company might forward the tax totals up to the third-party to make the tax deposits, the employer is the responsible party. If the third-party stops working to make the federal tax payments, then the IRS may assess charges and interest on the company's account. The employer is responsible for all taxes, penalties and interest due. The company might likewise be held personally accountable for specific unpaid federal taxes.

- If there are any problems with an account, then the IRS will send out correspondence to the company at the address of record. The IRS highly suggests that the employer does not change their address of record to that of the payroll service supplier as it might significantly limit the employer's ability to be informed of tax matters including their company.

- Electronic Funds Transfer (EFT) need to be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to ensure their are utilizing EFTPS, so the companies can confirm 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 regularly validate payments. A warning needs to go up the very first time a company misses 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 allows employers to make any extra tax payments that their third-party company is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and companies, who acting under the look of a payroll service supplier, have actually taken funds planned for payment of employment taxes.

EFTPS is a secure, precise, and simple to utilize service that provides an instant verification for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and allows companies 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, companies can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment kind or to speak to a client service representative.

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

Employers who think that an expense or notice gotten is an outcome of a problem with their payroll provider ought to get in touch with the IRS as quickly as possible by calling the number on the expense, composing to the IRS office that sent out the costs, calling 800-829-4933 or going to a local IRS office. To find out more about IRS notices, costs and payment alternatives, refer to Publication 594, The IRS Collection Process PDF.