Checking on your Payroll Provider

Outsourced Payroll, but did you check on your Payroll Providers?

The easiest way to do payroll, quite frankly is to sign up with a third party payroll provider, even if you have an accountant. In addition to processing your employees’ paychecks on time, your federal tax liabilities and state tax liabilities are paid as part of the service.

Behind the scenes…

Filing the right forms

To stay in compliance, at the end of each quarter your payroll provider will file your federal and state payroll tax forms with the appropriate agencies. A separate Form 941 is filed for each quarter. The first quarter is January through March. The second quarter is April through June. The third quarter is July through September. The fourth quarter is October through December.  Form 941 is generally due by the last day of the month following the end of the quarter. For example, wages you pay during the first quarter, January through March, must generally be reported on Form 941 by April 30th.

In addition to 941 Federal and Quarterly state forms, the yearly forms that are required to be filed are:

1.       944 Federal: To reduce the burden on small business taxpayers, IRS allows employers with small payrolls (liability < $1,000), including government employers to file an annual Form 944.

2.       W-2 and W-3

3.       940 Federal

4.       Annual State Reconciliations

The copies of these forms, that your payroll provider files, should be available to you by May 5, August 5, November  5, February  5 and March 5 of the respective quarter.

Depositing the taxes

The payroll providers withdraw money from your bank account to pay the appropriate Federal or State government agency.

·         If tax liability < $2,500 per quarter, deposit tax with return filing.

·         If tax liability > $2,500 per quarter, deposit tax according to the deposit schedule i.e. monthly or semiweekly.

Beginning January 1, 2011, all deposits must be made by electronic funds transfer using the Electronic Federal Tax Payment System (EFTPS). Late deposits are subject to penalties.

You should verify with the Payroll provider if they support payment of the local payroll taxes, workers compensation on your behalf, because these payments are the responsibility of the employer.

Visit http://www.maximtaxservices.com/services.html to find out the latest offerings in payroll services from Maxim Tax Services.