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Keep close tabs on outsourced payroll

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in Small Business Tax

Have you outsourced payroll duties to a third party provider? It can save time and money.

Alert: Be aware that outsourcing doesn’t relieve you of your tax obligations. The IRS could still come after your company.

The IRS has posted reminders to business taxpayers about the key rules. Here’s the gist of it.

  1. Your company is ultimately responsible for federal tax liabilities even if the third party makes the payroll tax deposits. If the third party fails to do so in a timely manner, the IRS may assess penalties and interest on the employer’s account. In some cases, you could be held personally liable for federal taxes withheld from employee paychecks under the “100% penalty.” Best approach: Check and double-check to ensure taxes have been paid.
  2. If the IRS has concerns about an account, it will send correspondence to the employer’s address of record. Don’t change the record to reflect the third party’s address.
  3. The Electronic Federal Tax Payment Sys­­­­­tem (EFTPS) must be used if payroll taxes exceed $200,000 for the year. Register on EFTPS to obtain a Personal Identification Num­­ber (PIN) and use the PIN to verify payments. You can access your history online for 16 months.

EFTPS also allows you to make additional payments the third party may have missed, such as estimated tax payments. Note that you can use the system even if your payroll tax liabilities fall below the annual $200,000 mark.

Tip: Enroll in EFTPS online or call (800) 555-4477.

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