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Tax tips for California employers that outsource payroll

There are many Orange County businesses that struggle during these tough economic times. The response of many California businesses to financial pressures during the recession varies. Some businesses lay off workers whereas other businesses delay vendor, contractor or rent payments to make ends meet. There is also a subset of Orange County businesses which are beginning to delay payroll tax payments in order to avoid folding.

Delaying payroll taxes is risky and many businesses who fail to pay taxes intend to make up for the taxes before the IRS notices any discrepancies. Small businesses who find themselves faced with an audit arising out of withholding payroll taxes should consult an experienced Orange County payroll tax lawyer who can aggressively represent businesses before the IRS.

There are some businesses that may catch the attention of the IRS because a third-party payroll company botched its duties. California businesses are still responsible for ensuring the accuracy of their payroll taxes even if payroll duties are outsourced.

The IRS has recently reiterated employer responsibility for the payment of federal tax liabilities. The IRS plans to assess penalties and interest if an employer's third party payroll provider fails to make the appropriate payments.

If an issue does arise, the IRS will send correspondence to the employer's address of record. It is best for this address not to be changed to the payroll service provider's address.

Employers can also verify the payment of federal taxes by choosing a payroll service that uses the Electronic Federal Tax Payment System (EFTPS) which is recommended by the IRS.

Source: IRS, "Three Tips for Employers Outsourcing Their Payroll," Special Edition Tax Tip 2011-05, September 2, 2011

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