Tax News: Employer Reminder for 3rd-Party Payroll Companies
The Internal Revenue Service (“IRS”) issued a reminder to employers to carefully choose their payroll service providers following continuing concerns that some disreputable organizations can fail to deposit employment taxes, leaving businesses vulnerable to unpaid bills.
Many employers outsource their payroll and related tax duties to third parties. This streamlines business operations by collecting and timely depositing payroll taxes on the employer's behalf and filing required payroll tax returns with state and federal authorities.
Though most of these businesses provide quality service, there are, unfortunately, some who do not have their clients' best interests at heart. Each year, a few of these third parties fail to remit the payroll taxes entrusted to them and close their doors abruptly. Like employers who handle their own payroll duties, employers who outsource this function are in most instances still legally responsible for any and all payroll taxes due.
One third-party arrangement that can reduce this risk is the certified professional employer organization (CPEO). Unlike other third parties, in most circumstances, the CPEO is solely liable for paying the customer's employment taxes, filing returns and making deposits and payments for the taxes reported with regard to wages and other compensation it pays to its employees. More information on CPEOs can be found on IRS.gov.
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