"XXXXXX
XXXXXXX" <x@xxxxschools.org> writes:
Does
anybody outsource their payroll?
 |
| Outsourcing leads to loss of control and direct oversight |
I recently got an
email from a colleague asking about outsourcing payroll. In these tough economic times with a 2% CAP
on tax levy increases in New Jersey for public schools, many boards and
administrators continue to search for savings that often lead to questions
about outsourcing various functions of the operation. Payroll is no exception as the there are a
myriad of companies out there willing to take on the function at a savings to
the client. As with this or any outsourced
function, keep in mind “business is business” and nothing is free. Often I speak of “opportunity cost” in
addition to actual dollars expended as the decision impacts your ability to
retain direct control over the activity.
With payroll, having the ability to meet, discuss and review critical
issues in real time vs. coordinating phone calls and follow up with individuals
who are not familiar with the personnel or circumstances puts you at a
loss. Likewise, you lose the ability to
brainstorm and create back up spreadsheets and calculations needed in
negotiations, budgeting and on site verification of tax issues or employee deductions.
Outsourcing payroll
is really not a great option since you still are required to compile, calculate
and prepare the payroll input prior to handing off to an outsourced company
such as ADP. The processing, printing
and distribution is actually the easy part.
Not to mention the
loss of control with respect to errors, compliance and proper remittance of
taxes, look what happened a few years ago when municipalities and boards of ed
got burned through an embezzlement of agency funds that were earmarked for tax
remittance.
“Even though you
forward the tax payments to the third party to make the tax deposits, you—the
employer—are the responsible party,” the IRS cautioned. “If the third party
fails to make the federal tax payments, the IRS may assess penalties and
interest. The employer is liable for all taxes, penalties and interest due. The
IRS can also hold you personally liable for certain unpaid federal taxes.” (SEE
BELOW)
http://www.accountingtoday.com
IRS Warns Employers about Payroll Outsourcing Fraud
Washington, D.C. (September 2, 2011)
By Michael Cohn, Accounting Today
The Internal Revenue Service issued advice on Friday to employers
who outsource their payroll duties to third-party service providers.
In a tax tips email, the IRS referred to recent prosecutions of
individuals and companies that pretended to be payroll service providers and
instead stole funds intended for payment of employment taxes. The IRS noted
that the employer is ultimately responsible for depositing and paying federal
tax liabilities.
“Even though you forward the tax payments to the third party to
make the tax deposits, you—the employer—are the responsible party,” the IRS
cautioned. “If the third party fails to make the federal tax payments, the IRS
may assess penalties and interest. The employer is liable for all taxes,
penalties and interest due. The IRS can also hold you personally liable for
certain unpaid federal taxes.”
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