Payroll Services – Employer’s Responsibility

Payroll Services – Employer’s Responsibility


Payroll Services are the Employer’s Responsibility – Although an outside payroll services provider can administer company payroll, make payroll tax payments, manage employee benefits, submit payroll tax returns and prepare payroll tax reports, the ultimate responsibility for preforming all of these functions lies with the employer. For this reason, selection of an outside payroll services provider is a very important decision. In fact, it is such an important choice that the IRS devotes an entire section of its website to discussing the employer’s payroll responsibilities and emphasizing some of the important points to consider in selecting an outside payroll services provider.

Payroll Services - Employer's Responsibility

Payroll Services – Employer’s Responsibility

One point to consider when hiring a payroll services provider is the correspondence address. The IRS maintains an address of record for each payroll tax account on record and sends all official correspondence that address. Therefore, even when a company enlists the services of a third party, the IRS recommends leaving the employer’s address as the address of record rather than changing it to that of the outside payroll services provider. Since the payment of payroll taxes is ultimately the employer’s responsibility, it is important that they receive, first hand, any correspondence related to their payroll tax account.

A second consideration when hiring an outside payroll services provider is employer responsibility. It is important to realize that it is ultimately the employer’s responsibility to make quarterly payroll tax payments. Although they may enlist the services of a third party payroll services provider to calculate and submit those payments, it is the employer’s account that will be penalized if there is an error or a delinquency. Because payroll tax payments include amounts that are withheld from employee paychecks, the IRS issues stiff penalties when payments are not made on time. In fact, the IRS can impose a penalty equal to as much as 100% of a delinquent payroll tax balance. This penalty, called the Trust Fund Recovery Penalty, can be assessed against any individual within a company who has the power to collect or pay payroll taxes.

As an additional consideration, the IRS suggests choosing a third party payroll services provider that uses the Electronic Federal Tax Payment System to submit payroll tax payments. The Electronic Federal Tax Payment System (which is mandatory for making payments in excess of $200,000) is strongly recommended for making all payroll tax payments. This system is accurate and provides immediate verification that a payroll tax payment has been made. In addition, it allows the employer to log into the system at any time to view their account activity.

In conclusion, although the outsourcing of payroll services is often a smart decision, care should be exercised when selecting a third party payroll services provider. Since payroll services are critical to a company’s success, it is important to select a provider that is both ethical and competent and provides services that are in line with the company’s needs.

The professionals at Orange County Bookkeeping can provide your company with a complete set of outsourced payroll services. Our licensed accountants and bookkeepers are equipped to serve Orange County businesses of any size, structure or industry focus. Visit us today at to learn more about what we offer in the areas of bookkeeping, tax, business accounting and business consulting. Contact us by phone at 949.242.9852 or by email at  to receive a free, no obligation consultation.


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