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Payroll tax outsourcing: IRS offers compliance tips

One of the threads we’ve been following in this blog is issues involving the outsourcing of payroll taxes by employers to third parties. Payroll-tax outsourcing is common for many small and medium-size companies.

Such companies often lack the personnel to specialize in employment tax compliance matters. Third parties can play a very useful role in collecting and depositing payroll taxes for the employer, as well as making appropriate tax filings with state and federal revenue agencies.

In today’s post, we will take note of some tips that the IRS offers for employers who engage in payroll tax outsourcing.

Nearly a year ago, in our July 21 post last year, we wrote about some of the problems that can arise when the third party fails to follow through on taking care of an employer’s payroll taxes.

This could occur because of fraud. It could also occur due to financial problems; some third-party providers of payroll services even become insolvent.

The IRS is aware that these things can occur and offers various tips to try to make tax compliance easier.

For example, the IRS encourages employers to use the Electronic Federal Tax Payment System. (EFTPS). The EFTPS enables employers to do a quick online check of tax deposits that have been made under its Employer Identification Number (EIN).

In other words, in the EFTPS the IRS has provided an online tool to allow employers to check up on their third-party payroll tax providers. The tool makes helps employers keep tabs on their third-party providers, to monitor that they are carrying out the tax payment tasks properly.

Source:, "Tips for Employers Who Outsource Payroll Duties," Accessed July 8, 2014

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