Finding Real Life Solutions To Your Tax Problem

Watch out for these warning signs when using a tax payroll service provider

On Behalf of | Dec 28, 2022 | Audits, Corporate Taxes |

Business owners balance everything from operational needs to making sure the services or products provided are profitable. It is often beneficial for business owners to outsource certain business needs. This is particularly true for areas of operation that require special knowledge and are often time consuming, like managing payroll taxes.

What services does a third-party payroll tax service provide?

Business owners may use a third party payroll services provider (PSP) to help administer payroll services and pay employment tax obligations. This can include the preparation of paychecks, tax forms, and payment of federal and state tax deposits.

What are warning signs that a PSP is not acting in my business’ interests?

It is generally best to avoid a PSP with a bad reputation. Ideally, check with references provided by the PSP before moving forward with their services but also take note if you hear complaints from fellow owners about a PSP that your business is currently using.

It is also important to carefully review the PSP’s contract. Check to see if it allows you to hold the provider responsible for any error or misconduct. It is a red flag if the contract absolves the provider from all liability.

How can I protect my business?

The Internal Revenue Service (IRS) explains that although these services are beneficial and widely used by business owners throughout the country, the agency will hold the business owner responsible for meeting their tax obligations. In addition to watching out for the warning signs noted above, business owners can take steps to better ensure their business interests are protected including:

  • Check that the PSP has an official address. Business owners can verify this information with the IRS.
  • Enroll in the Electronic Federal Tax Payment System (EFTPS). This system allows the employer to verify the PSP made deposits and payments on behalf of the business.

Those who are concerned that a PSP is not acting in their best interests have options. An attorney experienced with these matters can review the situation and provide guidance on how to move forward while also protecting your business’ interests.


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