IRS Warns Employers of Outsourcing Payroll
The IRS has issued a reminder to employers who outsource their employee payroll processing to a third party, to be careful about the due diligence performed on the payroll company. Third party payroll processors receive tax deposits and then forward those tax deposits on to the IRS.
Recent IRS prosecutions of individuals and companies who act under the guise of a payroll service providers, have stolen funds intended for payment of employment taxes, leaving the employer left holding the bag for the tax deposits that were stolen, as well as the penalties and interest on those deposits assessed by the IRS.
Typically, we see this scenario with small businesses that keep the task of processing payroll in-house, but recently according to the IRS, companies and individuals offering payroll services have been caught stealing tax deposits and informing their clients that those tax deposits have been remitted to the IRS on time.
When using an outside source for payroll services, verify from time to time that the payments are being received by the IRS, as well as utilize the services of well established providers that use the Electronic Federal Tax Payment System (EFTPS). If your provider is using the EFTPS system, it will be very easy for you to verify that the deposits are in fact being remitted.
If the IRS suspects an issue with your payroll deposits, they will send a notice to the “address of record” for the company. Do not ever change the “address of record” with the IRS, this way you will know when there is a potential problem with the payroll deposits.
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