Outsourcing payroll responsibilities can be a sound service practice, however ... Know your tax responsibilities as an employer

Many companies outsource some or all their payroll and related tax duties to third-party payroll provider. Third-party payroll service suppliers can streamline organization operations and assist fulfill filing deadlines and deposit requirements. A few of the services they supply are:

- Administering payroll and work taxes on behalf of the 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 contract out some or all their payroll obligations must consider the following:

- The employer is ultimately 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 responsible party. If the third-party fails to make the federal tax payments, then the IRS may evaluate charges and interest on the employer's account. The employer is responsible for all taxes, penalties and interest due. The company might also be held personally liable for certain overdue federal taxes.

- If there are any concerns 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 provider as it may significantly restrict the company's ability to be informed of tax matters involving their business.

- Electronic Funds Transfer (EFT) need to be used to transfer all federal tax deposits. Generally, an EFT is used Electronic Federal Tax Payment System (EFTPS). Employers need to guarantee their payroll companies are utilizing EFTPS, so the companies can verify that payments are being made on their behalf. Employers should register on the EFTPS system to get their own PIN and use this PIN to regularly validate payments. A warning should increase the very first time a provider misses out on 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 employers to make any extra tax payments that their third-party service 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 look of a payroll provider, have taken funds meant for payment of employment taxes.

EFTPS is a protected, accurate, and simple to use service that provides an immediate verification for each deal. 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 digitally 24 hr a day, 7 days a week through the web or by phone. For additional information, employers can enlist online at EFTPS.gov or call EFTPS Customer Service at 800-555-4477 for an enrollment type or to talk to a customer care agent.

Remember, employers are eventually responsible for the payment of income tax withheld and of both the company and staff member portions of social security and Medicare taxes.

Employers who believe that a costs or notice received is an outcome of a problem with their payroll provider ought to contact the IRS as soon as possible by calling the number on the expense, composing to the IRS workplace that sent out the expense, calling 800-829-4933 or going to a regional IRS workplace. For more details about IRS notices, expenses and payment choices, refer to Publication 594, The IRS Collection Process PDF.