Tax Tip 2021-103: Employers should choose their payroll service provider carefully to protect against fraud

IRS Tax Tips July 19, 2021
Useful Links: IRS.gov Help For Hurricane Victims News Essentials What's Hot News Releases IRS - The Basics IRS Guidance Media Contacts Facts & Figures Around The Nation e-News Subscriptions The Newsroom Topics Multimedia Center Noticias en Español Radio PSAs Tax Scams/Consumer Alerts The Tax Gap Fact Sheets IRS Tax Tips Armed Forces Latest News IRS Resources Compliance & Enforcement News Contact Your Local IRS Office Filing Your Taxes Forms & Instructions Frequently Asked Questions Taxpayer Advocate Service Where to File IRS Social Media	Issue Number:   Tax Tip 2021-103 Employers should choose their payroll service provider carefully to protect against fraud When hiring a company to handle payroll and payroll tax, employers should carefully choose their payroll service provider. This can help a business avoid missed deposits for employment taxes and other unpaid bills. Most of these businesses provide quality service but there are some who don't have their clients' best interests in mind. Each year, there are a few payroll service providers who don't submit their client's payroll taxes and closedown abruptly. The damage hits their unsuspecting clients hard. Typically, these clients remain legally responsible for paying the taxes due, even if the employer sent funds to the payroll service provider for required deposits or payments. Employers need to understand their payroll and employment tax responsibilities and choose a trusted payroll service. Here are a couple options: A certified professional employer organization. Typically, CPEOs are solely liable for paying the customer's employment taxes, filing returns, and making deposits and payments for the taxes reported related to wages and other compensation.  An employer enters into a service contract with a CPEO and then Form 8973, Certified Professional Employer Organization/Customer Reporting Agreement, is submitted to IRS.  Employers can find a CPEO on the Public Listings page of IRS.gov. Reporting agent. This is a payroll service provider that informs the IRS of its relationship with a client using Form 8655, Reporting Agent Authorization, which is signed by the client. Reporting agents must deposit a client's taxes using the Electronic Federal Tax Payment System and can exchange information with the IRS on behalf of a client, such as to resolve an issue. They are also required to provide clients a written statement reminding the employer that it, not the reporting agent, is ultimately responsible for the timely filing of returns and payment of taxes.  IRS encourages employers to enroll in EFTPS and make sure its payroll service provider uses EFTPS to make tax deposits. It's free and it gives employers safe and easy online access to their payment history when deposits are made under their Employer Identification Number, enabling them to monitor whether their payroll service provider is meeting its tax deposit responsibilities. Employers should contact the IRS about any bills or notices received, especially payments managed by a third party. Call the number on the bill, write to the IRS office that sent the bill, or contact the IRS business tax hotline at 800-829-4933. More information: Employment Taxes Outsourcing Payroll and Third Party Payers Third Party Arrangement Chart CPEO Customers – What You Need to Know Reporting Agents File Share this tip on social media -- #IRSTaxTip: Employers should choose their payroll service provider carefully to protect against fraud. https://go.usa.gov/xFxVr Back to Top         Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov. This message was distributed automatically from the IRS Tax Tips mailing list. Please Do Not Reply To This Message.

 

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