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

Many companies outsource some or all their payroll and related tax tasks to third-party payroll company. Third-party payroll provider can simplify company operations and help fulfill filing due dates and deposit requirements. A few of the services they provide are:

- Administering payroll and employment taxes on behalf of the company where the company supplies the funds at first to the third-party.
- Reporting, collecting and transferring employment taxes with state and federal authorities.

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

- The company is eventually responsible for the deposit and payment of federal tax liabilities. Even though 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 may evaluate penalties and interest on the employer's account. The employer is liable for all taxes, penalties and interest due. The employer may likewise be held personally accountable for particular unpaid federal taxes.
- If there are any concerns with an account, then the IRS will send correspondence to the company at the address of record. The IRS strongly suggests that the company does not change their address of record to that of the payroll provider as it might substantially restrict the employer's ability to be informed of tax matters involving their business.
- Electronic Funds Transfer (EFT) must be used to deposit all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers ought to ensure their payroll service providers are utilizing EFTPS, so the companies can confirm that payments are being made on their behalf. Employers should sign up on the EFTPS system to get their own PIN and use this PIN to periodically confirm payments. A warning should increase the very first time a service provider misses a payment or makes a late payment. When a company signs up on EFTPS they will have online access to their payment history for 16 months. In addition, EFTPS permits companies to make any additional tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have been prosecutions of people and companies, who acting under the look of a payroll service company, have taken funds planned for payment of work taxes.

EFTPS is a safe and secure, precise, and easy to use service that offers an instant verification for each transaction. This service is provided totally free of charge from the U.S. Department of Treasury and allows employers to make and verify federal tax payments electronically 24 hr a day, 7 days a week through the internet or by phone. For more details, companies can enlist online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for a registration kind or to consult with a customer support representative.

Remember, employers are for the payment of income tax kept and of both the company and worker parts of social security and Medicare taxes.

Employers who think that a bill or notification received is an outcome of a problem with their payroll provider need to get in touch with the IRS as quickly as possible by calling the number on the bill, composing to the IRS office that sent the costs, calling 800-829-4933 or checking out a regional IRS workplace. For additional information about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.