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Are you certain your payroll taxes are timely paid?

Payroll taxes are one of the more serious side effects of being an employer. The payroll tax is owed by the employer and must be collected and paid to the IRS, but it is treated differently than typical income tax payments by a taxpayer.

Because the payroll, or FICA tax, is a component of the Social Security program, it is treated by the IRS as a payment made in trust for the employee, and because of this, a failure to pay this tax can result in severe penalties.  

Perhaps your first clue of the seriousness with which the Service treats these matters is the fact that the fairly monochromatic IRS website employees bold red headers on the page dealing with "Depositing and Reporting Employment Taxes."

While many business outsource their payroll taxes, a report from Treasury Inspector General for Tax Administration (TIGTA), provides cause for worry, as some of these entities apparently are failing to remit the payroll taxes they collect.

The TIGTA report should serve as a reminder to all employers that while they may use third-party processors to handle this activity, they remain ultimately responsible for the payment of the tax and any penalties associated with noncompliance with that obligation.

The IRS recommend that taxpayers carefully vet any service that they hire and that they enroll in the Electronic Federal Tax Payment System (EFTPS), which can be used by the employer to monitor all tax payments made on their behalf. This should be done with the use of the Employer Identification Number (EIN) to ensure that these payments are traceable via the EFTPS.

There are four types of payroll service providers and only two of them have to submit a disclosure form that identifies the link between the provider and the employer. The TIGTA has urged the IRS to fix this discrepancy twice prior to this report.

Some of the difficulty with this issue is due to the need for Congress to change the relevant laws that govern these matters. This has not happened.

Source: accountingtoday.com, "IRS Cracks Down on Payroll Service Providers," James Paille, May 20, 2015

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