IRS Special Edition Tax Tip 2011-05

I found this IRS tax tip quite interesting as it relates to third party tax functions and peovides a reminder to this people and companies who outsource that at the end of the day THEY are responsible for any tax debts and NOT the third party provider.

That is why tax forms for the CRA, MRQ and IRS require a signature.
So they have someone to hold liable.

Intaxicating tax tip: If you’re not sure, or do not understand what is contained on a form, slip or return. do NOT sign it!!!

Here is the IRS release:

Three Tips for Employers Outsourcing Their Payroll

Outsourcing payroll duties to third-party service providers can streamline business operations, but the IRS reminds employers that they are ultimately responsible for paying federal tax liabilities.

Recent prosecutions of individuals and companies who – acting under the guise of a payroll service provider – have stolen funds intended for payment of employment taxes makes it important that employers who outsource payroll are aware of the following three tips from the IRS:

1. Employer Responsibility. The employer is ultimately responsible for the deposit and payment of 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. 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.

2. Correspondence. If there are any issues with an account, the IRS will send correspondence to the address of record. The IRS strongly suggests you do not change the address of record to that of the payroll service provider. That could limit your ability to stay informed of tax matters involving your business (I do not necessarily agree with this as a good third party providor will either eat any penalty charged or should be providing updates to their client including copies of notices as part of thier day-to-day process.
3. EFTPS. Choose a payroll service provider that uses the Electronic Federal Tax Payment System. You can register on the EFTPS system to get your own PIN to verify the payments.

Information on EFTPS is available on the IRS web-site. The staff in the EFTPS are are VERY knowledgable and VERY friendly. Trust me… I know.

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Author: Warren Orlans

Welcome to inTAXicating. My name is Warren Orlans and this is my blog. With over 17-years experience in the taxation industry, 11 of them working for the Canada Revenue Agency (CRA), and the rest working in the private sector at large financial institutions responsible for resolving tax issues for corporations and individuals and the Canadian lead for a large US bank on FATCA implementation. My tax career began pretty much out of university at the CRA, in Collections, where I moved up, across, over and up again through their division with stops in Enforcement, Taxpayer Relief (then Fairness), Audit, Directors Liability, Training, Mentoring, GST, GST/HST, Payroll, Corporate Tax, Personal tax, and probably much more. If you have a collections, compliance or audit issue with the CRA, MRQ, IRS or with the CRTC, WSIB or any aspect of those agencies, inTAXicating is the place you need to contact. inTAXicating has entered into a strategic partnership with Goldhar and Associates, to create Goldhar Tax Solutions. This partnership allows my team to include amazing tax lawyers, insolvency practitioners, mortgage brokers, debt counselling experts and much more. When dealing with governments, knowledge is power. We possess strong understanding of government so we know what the next step is before the government does. When you have a collections problem with the CRA, do you hire a graphic artist? No, you get a former collector who trained the staff, and who worked as a resource officer for 5 years. Then you know you are on the right track to resolving your tax problem(s). Others offer suggestions. We offer solutions! tax@goldhar.ca

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