Out sourcing Payroll (Owners Responsibilities)

Many companies outsource some of if not all of their payroll to a third party. Giving this third party the right to file and submit paperwork on behalf of their business, but do you know that you are still accountable if no payments are made? Please always thoroughly read contracts when it comes to outsourcing your money, some but not all companies will take responsibility for penalties incurred on their behalf. The IRS states that “The employer is responsible for the deposit and payment of federal tax liabilities. Even though the employer may forward the tax amounts to the third-party to make the tax deductions, the employer is the responsible party. If the third-party fails to make the federal tax payments, the IRS may assess penalties and interests to the employers account and the employer is liable for all penalties and interests due.”


When outsourcing your payroll please DO NOT change your address on record to the address of your payroll service provider. It is imperative that all necessary paperwork comes to your address so that you are able to track if your paperwork is being processed in a timely manner, what’s going on with your accounts and you’ll also know deadlines.
The best way to track Federal tax payments is to assure your payroll company has EFTPS (Electronic Federal Tax Payment System) to confirm payments are being made on your behalf. The IRS says “everyone should use EFTPS and treasury regulations for payroll taxes over $200,000 in a calendar year.” Before outsourcing your payroll register on the EFTPS system to get your own PIN for online access and you will always be able to verify payments and be alarmed if any payments were late or missed.

Employers are able to make any payments that their third party missed and the website allows you to look at your past history for the last 16 months. BEWARE – there have been recent prosecutions of individuals and companies acting as payroll providers that have stolen funds intended for payments of employment taxes. Always be sure that all businesses you deal with (not just payroll) are accredited by the Better Business Bureau (BBB) to avoid fraud.

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