Outsourcing payroll duties can be a sound organization practice, but … Know your tax responsibilities as an employer

Many companies contract out some or all their payroll and associated tax duties to third-party payroll service companies. Third-party payroll service companies can streamline company operations and help satisfy filing deadlines and deposit requirements. Some of the services they provide are:

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

• Reporting, collecting and depositing employment taxes with state and federal authorities.
  
  Employers who contract out some or all their payroll duties must consider the following:
  
  - The company is eventually responsible for the deposit and payment of federal tax liabilities. Despite the fact that the company may forward the tax amounts to the third-party to make the tax deposits, the company is the accountable party. If the third-party fails to make the federal tax payments, then the IRS may assess penalties and interest on the employer’s account. The company is liable for all taxes, charges and interest due. The company may also be held personally accountable for certain overdue 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 suggests that the company does not alter their address of record to that of the payroll company as it may significantly limit the company’s capability to be informed of tax matters including their company.
• Electronic Funds Transfer (EFT) must be utilized to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to guarantee their payroll providers are utilizing EFTPS, so the companies can verify that payments are being made on their behalf. Employers need to register on the EFTPS system to get their own PIN and use this PIN to occasionally verify payments. A red flag should go up the very first time a provider misses out on a payment or makes a late payment. When an employer registers on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS enables companies 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 people and companies, who acting under the appearance of a payroll company, have stolen funds meant for payment of work taxes.
  
  EFTPS is a safe, accurate, and simple to use service that offers an instant confirmation for each transaction. This service is used totally free of charge from the U.S. Department of Treasury and permits employers to make and confirm federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For more details, employers can enroll online at EFTPS.gov or call EFTPS Customer support at 800-555-4477 for a registration kind or to consult with a customer service representative.
  
  Remember, companies are eventually accountable for the payment of earnings tax and of both the employer and staff member parts of social security and Medicare taxes.
  
  Employers who think that a costs or notice gotten is an outcome of an issue with their payroll company should get in touch with the IRS as quickly as possible by calling the number on the bill, writing to the IRS office that sent out the expense, calling 800-829-4933 or visiting a regional IRS office. For additional information about IRS notifications, expenses and payment options, describe Publication 594, The IRS Collection Process PDF.