Be careful when choosing a payroll service

The IRS is currently reminding employers to carefully choose their payroll service providers.

Many businesses hire payroll companies to take care of their payroll tax duties. Payroll duties can be time consuming for a small business. 

Hiring a payroll service may be invaluable. They can free up a company’s time to perform functions that are much more important to the business’s success. 

Many employers outsource their payroll and related tax duties to third parties.   Most third-party payroll services do an excellent job helping small businesses meet their deadlines and payroll obligations.

However, it is extremely important that a business is careful when they are hiring a reputable payroll tax company. The consequences can be devasting to a business’s operations and existence.

Unfortunately, there are some disreputable payroll services that fail to deposit employment taxes with the IRS and use it for their own purposes. Even though the payroll services have taken your business’s money, if the payroll taxes aren’t paid, you would be held legally responsible for paying the tax liability.

The payroll service could be keeping your money for several months before the IRS would receive a letter to notify you that your taxes hadn’t been paid. In addition to owing the back taxes you would also be responsible for paying substantial penalties and interest.

Having to come up with the funds to pay the payroll tax for several months again plus penalties and interest is something many small businesses could not recover from.

A small company could hire their own bookkeeper to handle payroll duties, but this may not be cost efficient and even company bookkeepers can embezzle money. 

Hiring a reputable payroll service can be extremely important to the business’s existence.

There are several precautions that you can take.

Avoid substituting the payroll company’s address for your address with the IRS. Even though you are allowed to make this change, the IRS recommends that you continue to use your address as the address on record with the IRS. Doing so ensures that you will continue to receive bills, notices, and other IRS correspondence.

Another precaution that can be taken is to hire a separate company to monitor your payroll tax payments with the IRS. Some tax resolution companies provide this service for a relatively inexpensive fee. The company will monitor your payroll tax payments to ensure that the payments are being paid.

David Zubler is a tax accountant and Enrolled Agent representing clients before the IRS with over 25 years of tax experience. He is the author of four tax books and is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, David can also be contacted by email at