Many employers are now outsourcing their payroll and related tax duties to third-party payroll service providers. These providers help assure filing deadlines and deposit requirements are met, while streamlining business operations. Payroll service providers help businesses administer payroll and employment taxes, report employment taxes, and aid in the collection and deposit of employment taxes with both state and federal authorities. Hiring an experienced and efficient group to handle these complicated processes can save you an inordinate amount of time and stress.
Important Considerations for Employers
The employer is ultimately held responsible for the deposit and payment of federal tax liabilities, even though the tax amounts may be forwarded to a third-party to make the tax deposits. Should the third-party fail to make the federal tax payments, the IRS will assess penalties and interest on the employer’s account.
Correspondence regarding any issues with an account will be sent by the IRS directly to the employer at the address of record. The IRS strongly recommends that employers do not change their address of record to that of the payroll service provider, as this will significantly limit the employer’s ability to be informed in a timely manner. Receiving your notification on time is essential to make correction in the most time-efficient manner.
Payroll service providers should use the Electronic Federal Tax Payment System (EFTPS) so employers can confirm that payments are being made on their behalf. Employer registration with a distinct PIN through the EFTPS system allows verification of payments and online access to payment history for the last 16 months. EFTPS also allows employers to make additional tax payments that their third-party will not, such as estimated tax payments.
False Service Providers
In recent years, individuals and companies have been prosecuted for theft of funds intended for payment of employment taxes. In all cases, employers are ultimately the parties responsible for the payment of income tax withheld, as well as both the employer and employee portions of social security and Medicare taxes.
If you believe a bill or notice received is a result of a problem with your payroll service provider, you should contact the IRS as soon as possible by either calling the number on your bill, writing to the IRS office that sent the bill, calling the IRS business division toll free at 1-800-829-4933, or visiting your local IRS office. For more information about IRS notices, bills, and payment options, refer to Publication 594, The IRS Collection Process.