Many businesses use a payroll service to file and remit their payroll tax payments. The use of a payroll service simplifies business’ payroll responsibilities because the business itself does not have to worry about the weekly or bi-weekly deposits or calculating employee withholdings. When using a payroll service, business owners need to be aware that the filing and payment of payroll taxes are still their responsibility. If a payroll service does not make a payment on behalf of the business for whatever reason, the business is still liable despite the fact that it paid money to a payroll service to remit to the IRS.
Recently, several payroll service companies have absconded with their customers’ money that was intended for the IRS. Their customers were then left with hefty IRS liabilities for failure to pay payroll taxes. The fact that businesses had timely paid their tax obligations through payroll services did not absolve them of their liabilities when those tax payments were not subsequently paid over to the IRS. It was as if the businesses were paying their taxes twice because they not only paid the IRS, but had already submitted their tax payments to the payroll service.
It is incumbent upon the business to monitor the remittance of the federal tax deposits and ensure the tax returns are filed. This can be accomplished by having the business directly contact the IRS on a regular basis to ensure funds have been posted to its account. While this may seem like a burden, it is something that can be done on a quarterly basis and will save the company money in the long run. If the payroll company is remitting its payments online, the business may require that the payroll service provide it with a password so it can confirm the payroll tax payments are regularly remitted.