My Army colonel always said, “In God We Trust, everyone else check”. ...Col David Wilson
Several small business owners may find the need to outsource their payroll services to a third party. Getting help with paying employees when it time for payday, as well as delegating quarterly payroll tax filing and/ or monthly tax deposit can ease the burden of running a business and making sure employees are paid.
However, I as a Enrolled Agent specializing in helping client’s in Trust Recovery Fund Penalty, and I find it alarming how hands off most small business owner are when it come to their payroll taxes once they have contracted a third party for payroll services. If you are a small business owner with employees you are still responsible to ensure that tax return are filed and deposit and payment are made. Un-filed/Un-paid payroll taxes, and Trust Recovery Fund Penalty can flatline a business. I urge you to read your quarterly reports, hold your service provider accountable, because the IRS will surely hold you accountable.
I cannot count how many times, I hear “so and so was responsible for our payroll” and how many times I see this area in business a disastrous. Its usually something like this; “my financial officer takes care of that, then the finance officer, “owe my accountant does our payroll taxes”, and then the accountant says, “yes, I filed the quarterly taxes and gave it to Mr. Business Owner or Finance Officer who was suppose to remit payment for their payroll tax.” Employees are paid, business owner continue running the business as usual. Unfortunately no one ever paid the payroll taxes. A couple of years later, business owner gets a hefty tax bill from the IRS for failing to pay his payroll taxes for “X” number of year plus a Trust Recovery Penalty. Now the finger pointing starts………News flash! Who’s checking who? My Army colonel always said, “In God We Trust, everyone else check”. I don't mean to sound insensitive, but if you want to be the "boss" you gotta start protecting your work investment and that is your business.
Employers are still responsible to ensure that tax returns are filed and deposits and payments are made, even if they contract with a third party to perform these acts. Finance Officer who has check writing authority can sometime be who is represented as the “employer” during a IRS responsible party determination. Employer remains responsible if the third party fails to perform any required action.
If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer, such as a payroll service provider (PSP) or reporting agent, make sure you are spot checking to make sure your payroll taxes are being in fact being paid and your quarterly reports are being filed. If you have payroll concern or for more information on payroll taxes and how to protect yourself from Trust Recovery Fund exposure give me a call (540)693-5881. “I answer my own phone”. ~Shalom
Fredericksburg's Tax Expert
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