Maybe you’ve decided to outsource payroll duties to a third-party provider. This 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 reminds business taxpayers about the key rules at www.irs.gov/businesses/small-businesses-&-self-employed/outsourcing-payroll duties. Here’s the gist of it:
- 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. ln some cases, you could be held personally liable for federal taxes withheld from employee pay checks under the ‘”trust fund recovery penalty” sometimes called the “100% penalty.” Best approach: Check and double-check to ensure taxes have been paid so you don ‘r risk the TFRP.
- If the I RS 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 l 6 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 S200,000 mark.
Tip: Enroll in EFPTS online at www.eftps.gov or call 800-555-4477.
Small Business Tax Strategies
August 2019