Outsourcing Payroll
Many employers outsource
some or all of their payroll and related tax duties (i.e., withholding,
reporting, and paying Social Security, Medicare, and income taxes) to
third-party payroll service providers. Third-party payroll service
providers can help assure filing deadlines and deposit requirements are
met and can greatly streamline business operations. Some of the services
they provide are:
- Administering payroll and employment taxes on behalf of the
employer, where the employer provides the funds initially to the
third-party.
- Reporting, collecting and depositing employment taxes with state and federal authorities.
Third Party Arrangements
As part of the outsourcing process,
employers may designate or enter into an agreement with a third party in
which the third party agrees to take over some or all of the employer’s
Federal employment tax withholding, reporting and payment
responsibilities and obligations. Depending on the facts and
circumstances, and the type of third-party arrangement, an employer who
uses a third party to perform Federal employment tax functions on its
behalf may remain solely liable for Federal employment taxes, or may
become jointly and severally liable for such taxes.