The IRS recently issued a fact sheet containing tips for employers who outsource payroll duties. In the fact sheet, the IRS reminded employers that they remain responsible for paying withholding taxes even if the employer has paid the payroll provider, but the payroll provider has failed to pay the money to the IRS.
Among the suggestions:
• Use the electronic federal tax payment system to make tax deposits and monitor payments through that website.
• Use the employer’s address, rather than the payroll provider’s address. That way the employer will receive any notices of nonpayment from the IRS.
• Do not ignore IRS notices.
While employers may not be able to stop an unscrupulous payroll provider from failing to pay the withholding taxes to the IRS, by following these suggestions, employers may be able to limit the damage.