The Internal Revenue Service wants owners of small businesses — and just about any sized business — to watch out for unscrupulous third-party providers who are entrusted with collecting and timely depositing payroll taxes on the employers’ behalf.
Many employers outsource these payroll and related tax functions to other businesses or individuals. They are also known as payroll service providers and reporting agents.
Reputable third-party payers – similar to The Boss Partnership payroll service – can help employers streamline their business operations.
“Though most of these businesses provide very good service, there are, unfortunately, some who do not have their clients’ best interests at heart,” the IRS said in a news item emailed this week.
A lot of businesses rely on these services because they don’t have the time to sort payroll out themselves. If this is the case for you then make sure you do a lot of research into the company you want to use, including doing background checks. A good company to go to is Payroll Specialties. Payroll Specialties is a full service Oregon payroll company with offices in Medford and Eugene OR.
The IRS has criminally prosecuted 10 payroll services in the last year for stealing client money meant to go toward payroll taxes.
The agency wants to remind business owners that they are responsible for payroll taxes — even if the third-party entity is at fault.
The IRS: “Like employers who handle their own payroll duties, employers who outsource this function are still legally responsible for any and all payroll taxes due. This includes any federal income taxes withheld as well as both the employer and employee’s share of social security and Medicare taxes.”
The IRS says these are some steps employers can take to protect themselves from unscrupulous third-party payers:
- Enroll in the Electronic Federal Tax Payment System and make sure the PSP or RA uses EFTPS to make tax deposits. Available free from the Treasury Department, EFTPS gives employers safe and easy online access to their payment history when deposits are made under their Employer Identification Number, enabling them to monitor whether their third-party payer is properly carrying out their tax deposit responsibilities.
- Refrain from substituting the third-party’s address for the employer’s address. Though employers are allowed to and have the option of making or agreeing to such a change, the IRS recommends that employer’s continue to use their own address as the address on record with the tax agency.
- Contact the IRS about any bills or notices and do so as soon as possible. This is especially important if it involves a payment that the employer believes was made or should have been made by a third-party payer. Call the number on the bill, write to the IRS office that sent the bill, contact the IRS business tax hotline at 800-829-4933 or visit a local IRS office. See Receiving a Bill from the IRS for more information.
- For employers who choose to use a reporting agent, be aware of the special rules that apply to RAs. Among other things, reporting agents are generally required to use EFTPS and file payroll tax returns electronically. See Reporting Agents File for more information.
- Become familiar with the tax due dates that apply to employers, and use the Small Business Tax Calendar to keep track of these key dates.