Outsource Payroll Tax Management to Avoid IRS Penalties

Vaibhav Devaansh
Hi-Tech FPO
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Outsource payroll tax management

Payroll tax management is often dreaded and seen as a huge source of frustration, among the entrepreneurs. As payroll is a part of well-regulated business obligation, where even federal government legalities are involved, it demands more caution. A single instance of negligence or poorly maintained payroll record may make the taxation extremely difficult and full of risks.

In fact, delayed payroll tax returns or remittance and withholding can amount to large penalties by the IRS and other financial regulation bodies. Therefore, several business owners, small and medium, hand over their payroll management to qualified CPA firms and in turn these CPAs outsource it to a payroll management company. 

Selection of payroll companies

When you are dealing with a third-party payroll processing company, make sure that they adhere to the non-disclosure policies and data security. Moreover, it is recommended to thoroughly evaluate various physical, administrative and technical precautions are taken by the third-party to maintain confidentiality and for prevention of data seepage.

In addition to this, you can ensure that all the account information such as passwords or social security numbers are protected by firewalls and encrypted authentication method. 

Let’s see how a third-party payroll management provider can help small businesses by making their payroll management and tax returns smooth and less-complicated.

1.    In-depth knowledge of tax liability in different states across USA

When a company has multiple offices and employees, located in different states, it adds to the complexity of payroll tax. Every state has its own set of rules and regulations, along with a difference in the rates prevailing in certain regions.

So, the rules applicable to a company based in Rockford, Illinois will not be applicable to an office that is based in Miami, Florida. Attempting to handle such complex payroll consumes lot of time and resources of a small business owner.

Moreover, a single instance of negligence and they have to bear the brunt of the regulatory bodies. However, this situation can be avoided, if a professional payroll management company intervenes. They are primed with different tax liabilities, applicable in various states and hence, file the tax returns accordingly. 

2.    Helps in alignment of bonus checks/overtime and tax returns 

Are you one of those who believe in handing out bonuses and overtime on time, as a gesture to appreciate your star employees? The timing of bonuses/overtime dispersal has tax implications. It is important that bonus/overtime payments must be aligned with the dates of return filing.

In case, if it is not properly lined up, you may get heavily penalized. Our representative based in New Philadelphia, Ohio strongly recommend to line up these two payments, to prevent any sort of penalties. However, in this case, an expert payroll management company will tell you the right time to release the bonuses or overtimes. 

3.    On time payment of withholding 

Remitting funds to IRS on the given date is extremely important. However, when it comes to payroll tax, the scenario changes, as the money belongs to the employees. It is the employees’ money that is held back and so on-time payment becomes very crucial.

In fact, our representatives in Manhattan, New York have encountered many such instances where, withheld money from paychecks, when handed over to the IRS, resulted into severe penalties.

Since, it is the most critical mistake; many SMEs often lag behind a quarter and therefore puts in extra efforts and resource to catch-up in the next quarter. This, however, usually never works. While, you have partners with a FPO service provider, timely payment of withheld tax is ensured. 

4.    Demarcates the business and payroll funds 

Small businesses, at times face financial crunch and very often get tempted to borrow money from the payroll. However, it is strongly advised to ignore such practices as they are against the law.

Our executives based in Beverly Hills, California are of the opinion that all the money collected from employees’ paycheck rightfully belongs to them and hence need to be deposited to their respective tax jurisdictions. When you rope in a professional payroll company, they take care that payroll fund remains intact. 

5.    Constant evaluation to ensure upgraded processes 

Since, payroll is never constant, it is important for small business owners and clients of CPA firms to continuously evaluate and update their payroll programs. This will ensure that payroll taxes are being withheld accordingly.

Our representative based in Houston, Texas says that since, tax requirements differ according to rules applicable in various states or municipalities, it is important to keep a tab on these changes.

Having partnered with a payroll management company helps the small business owner to upgrade their payroll tax processes and avoid any dire consequences. 


Outsourcing your payroll tax to professionals will help you become a responsible employer and even avoid any heavy penalties or legal entanglements with IRS or the Department of Labor.

About Vaibhav Devaansh

About Vaibhav Devaansh

Dr. Devaansh is a director of bookkeeping and accounting solutions at Hi-Tech FPO. With a career spanning over 17-plus years, he assists clients with operations in multiple economics, manage their overall accounting needs, financial planning and performance analysis reports of group organizations.


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