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

Many employers contract out some or all their payroll and associated tax tasks to third-party payroll service suppliers. Third-party payroll company can simplify business operations and assist meet filing due dates and deposit requirements. Some of the services they supply are:

- Administering payroll and employment taxes on behalf of the company where the employer supplies 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 responsibilities 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 totals up to the third-party to make the tax deposits, the company is the responsible party. If the third-party stops working to make the federal tax payments, then the IRS may assess penalties and interest on the company's account. The company is liable for all taxes, charges and interest due. The employer might also be held personally liable for specific unpaid taxes.

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

- Electronic Funds Transfer (EFT) need to be utilized to transfer all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll companies are using EFTPS, so the employers can validate that payments are being made on their behalf. Employers need to sign up on the EFTPS system to get their own PIN and utilize this PIN to periodically verify payments. A warning must increase the first time a service company misses out on a payment or makes a late payment. When a company signs up on EFTPS they will have on-line access to their payment history for 16 months. In addition, EFTPS allows employers to make any extra tax payments that their third-party supplier is not making on their behalf such as approximated tax payments. There have been prosecutions of individuals and companies, who acting under the appearance of a payroll provider, have actually taken funds intended for payment of employment taxes.

EFTPS is a secure, accurate, and easy to utilize service that supplies an instant confirmation for each transaction. This service is provided 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 internet or by phone. For additional information, employers can enroll online at EFTPS.gov or call EFTPS Customer care at 800-555-4477 for an enrollment form or to talk with a customer service representative.

Remember, employers are ultimately accountable for the payment of earnings tax withheld and of both the company and staff member parts of social security and Medicare taxes.

Employers who believe that a costs or notification received is an outcome of an issue with their payroll company need to call the IRS as soon as possible by calling the number on the bill, composing to the IRS workplace that sent out the bill, calling 800-829-4933 or visiting a local IRS workplace. For more details about IRS notifications, bills and payment alternatives, describe Publication 594, The IRS Collection Process PDF.