Frequently Asked Questions

Why Outsource Your Payroll?

As an employer, it’s your responsibility to make sure your employees are paid accurately, on time and within the confines of the many ever-changing laws.

Deciding how to manage your payroll may seem simple at first, but there’s a lot to know -from payroll taxes to W2s … minimum wage to overtime laws … filing requirements to penalties … and more. To make the right decision for your business, you need to consider the following:

In-house payroll using a manual system or a software package, you can calculate and produce your employees’ paychecks each week. You can also figure out your payroll tax obligations and make your own tax payments. Then, when it comes time to file your quarterly and annual payroll tax returns, you can either hire an accounting professional to generate those reports for you or do them yourself.

Before deciding to administer payroll in-house, there are a number of questions to answer:

  • Is your time better spent growing your business rather than working on payroll ?
  • Who will manage payroll and are they properly trained to do so?
  • Does the payroll person have any other responsibilities?
  • Who will have access to the payroll information?
  • Who will make payroll tax deposits?
  • Who will keep track of the changing federal and state tax regulations?
  • Who will prepare and file payroll tax returns?
  • Can your organization handle every payroll calculation and detail with precision and timeliness, week after week?
  • Are you completely familiar with everything entailed in filing payroll taxes for your company, as well as for each of your employees?
  • Do you have a system to issue payments automatically, or at least always effectively and on time?
  • Do you have the time and personnel to make sure all of these operations are performed accurately throughout the year?

If you are not sure of the answer to these questions, you probably need to outsource your payroll with JIT

Ease of Use -With JIT, your payroll responsibility is reduced to a simple function of communication each pay period. From paychecks to tax payments to the preparation of quarterly and annual tax returns, your time investment remains minimal, allowing you to focus on what’s most important… managing your business. Learn more about how payroll is processed through a JIT consultant.

Guarantee -Keeping track of the ever-changing tax regulations can be a nightmare. Why bother? With JIT, you have the comfort of knowing your payroll is being expertly handled. We guarantee all federal, state and local taxes will be filed and paid accurately and on time…or WE pay the penalties and interest!

Confidentiality -Where earnings are concerned, a breach in confidentiality can be devastating for any business. With JIT, your payroll information is kept strictly confidential, and can be accessed only by those authorized to do so, keeping your business safe from any potential disasters.

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Outsourcing Payroll Relieves Workload, But Not Tax Responsibilities
By Marcia Richards Suelzer, Toolkit Staff Writer

As an employer, you have many obligations to the federal and state taxing authorities. Among these are requirements that you withhold and pay over Social Security, Medicare and income taxes. The administrative complexities of payroll taxes can cut into the time that you need to run and grow your business, prompting many small employers to outsource the process.

Many small employers contract with a third-party payroll provider to handle some (or all) of their employment tax duties. In addition to lightening your workload, using a reputable and reliable payroll service helps to ensure that filing deadlines and deposit requirements are met.

Three Common Types of Payroll Services
There are three common third-party arrangements: Payroll Service Providers, Reporting Agents, and Section 3504 Agents. Whether you have the sole responsibility for payroll taxes, or become jointly liable for payroll taxes, varies based on the type of service you use. However, you are never completely off the hook!

Payroll Service Provider. This is the most common arrangement for a small business. A payroll service provider (PSP) typically prepares employment tax returns for signature by its employers/clients and processes the withholding, deposit and payment of the associated employment taxes. You can authorize your PSP to perform one or more of the following acts on your behalf:

Prepare the paychecks for your employees;
Prepare your required Forms 940 and 941, using your employer identification number (EIN);
File Forms 940 and 941 after you have signed them;
Make federal tax deposits (FIDs) and federal tax payments (FIPs);
Submit FID and FIP information for the taxes reported on the Forms 940 and 941; and/or
Prepare Forms W-2 for your employees using your EIN.

Using a PSP does not relieve you from your employment tax responsibilities. You are solely responsible: the PSP assumes no liability for your employment tax withholding, reporting, payment, and/or filing duties.

Reporting Agent. The major difference between a PSP and a reporting agent is the fact that a reporting agent can actually sign employment tax forms (such as Form 940 and Form 941) on your behalf. You must complete Form 8655, Reporting Agent Authorization, if you want your PSP to be able to act as a reporting agent and e-file Forms 940 and 941. Using a reporting agent does not relieve you from your employment tax responsibilities. A reporting agent assumes no liability for the
employer/clients’ employment tax withholding, reporting, payment, and/or filing duties.

Section 3504 Agent. Larger businesses may appoint an agent under Internal Revenue Code section 3504 to undertake the withholding, reporting and payment of federal employment taxes with regard to wages paid by the agent for the employer, as well as the agent’s own employees. This is done using Form 2678, Employer/Payer Appointment of Agent. A section 3504 agent agrees to assume liability along with the employer for the employer’s Social Security, Medicare and federal income tax withholding responsibilities. An agent files aggregate returns (e-file or paper) using the agent’s EIN. The IRS can seek to collect any unpaid employment taxes from both the employer and the section 3504 agent who was designated and authorized to pay the taxes. (The section 3504 designation does not apply to FUTA tax, with a limited exception provided for certain household workers.)

You Are Ultimately the Responsible Party
You may have outsourced your payroll function to a third party, but you are ultimately responsible for withholding, depositing and paying the federal tax liabilities associated with your business. This is true even if you were to use a section 3504 agent, although the agent will be co-liable.

Warning: It is critical that you select a reliable, reputable service that will deliver what it promises. Even if you forward the tax amounts to your service, expecting them to make the tax deposits, you are the responsible party for the payment of income taxes withheld, and both the employer and employee portions of Social Security and Medicare taxes. As an employer, you are liable for all taxes.

What is the New Hire Reporting Program?

New hire reporting is the process by which you, as an employer, report information on your newly hired employees to a designated state agency shortly after the date of hire. New hire reports are matched against child support records at the state and national levels to locate parents who owe child support. This is especially helpful for interstate cases (in which one parent lives in a different state from his or her child), which are often the most difficult cases for states to resolve.

With new hire reporting, state child support enforcement agencies have the ability to issue income-withholding orders – the most effective means of collecting child support – more quickly.

New Hire Reporting Instructions

Purpose – The state child support agency does two things with the new hire data. First, the agency compares the information submitted against current state child support files to locate parents. Second, the agency promptly passes the new hire information to the National Directory of New Hires, a component of the Federal Parent Locator Service within the Federal Office of Child Support Enforcement. This service compares the data from the employer’s state with child support information from other states and, when a match is found, provides the information to the appropriate state agency.

Data Elements – Federal law requires employers to collect and transmit seven data elements to fulfill their new hire reporting responsibilities. Many states require additional information beyond the seven data elements below.

DATA ELEMENT DEFINITION
Employer Name Name associated with the Federal Employer ID Number (FEIN)
Employer Address Address associated with the FEIN entity that employs the individual
FEIN Nine-digit number assigned to the employer by the IRS
Employee Name Full name associated with that employee’s Social Security number
Employee Address Current residential address of the new employee
Employee SSN Nine-digit SSN assigned to the employee by the SS Administration
Date of Hire The date services for remuneration were first performed
* It is strongly recommended that the payroll office address for the newly hired employee also be reported if it is different from the FEIN address. See the State New Hire Reporting Information matrix for state-specific requirements.

Reporting Medium – Payroll professionals will recognize that these data elements are identical to those collected on the Federal Form W-4, required from all new employees in order to add them to the firm’s payroll roster. Accordingly, many employers send copies of the W-4 as their official new hire report. Employers may also create their own report form or use a state-designed form. Many states accept, at the employer’s option, input through the following media: 1) mail, 2) fax, 3) interactive telephone systems, 4) e-mail over the internet, 5) state websites and 6) other electronic or magnetic media.

Reporting Frequency – According to federal law, employers must submit information on every new hire within 20 days of the date of hire, unless the submission is made electronically or magnetically. An employer reporting electronically or by magnetic medium must submit two transmissions each month (if necessary, based on the volume of hiring) not fewer than 12 days nor more than 16 days apart.

Multi-State vs. Single-State Employers – A single-state employer hires and employs people within one state. Such an employer is required to report all new hires to the state in which it does business, which is the same state where all its employees work. A multi-state employer hires and employs people in two or more states. Such an employer conducts business within each state, and reports its employees to the states where they work.

Multi-state employers may select one of the following reporting options:

  • Report newly-hired employees to the various states in which they are working, following the New Hire Reporting program regulations, requirements and timeframes of each state; or
  • Select one state where employees are working and report all new hires to that state’s designated New Hire Reporting office. (Note: this option is not available to multi-state payroll service companies reporting on behalf of their customers unless those customers are multi-state employers and have requested this option.)

Multi-state employers who choose to report to one state, must submit new hire reports electronically or magnetically. The multi-state employer should contact the state agency to which it will be reporting to obtain its current electronic data specifications.

Additionally, multi-state employers who report all their new hires to a single state must register with the Federal Department of Health and Human Services as to which state they have designated to receive all their new hire information. There is a good reason for this reporting requirement: The National Directory of New Hires maintains a list of those multi-state employers who have elected to use single-state notification. The designated reporting locations chosen by these employers can then be made available to all states.

When registering with the Department of Health and Human Services, the multi-state employer must include the following information:

Federal Employer Identification Number (FEIN),
Employer’s name, address and telephone number related to the FEIN,
State selected for reporting purposes,
Other states in which the company has employees,
Corporate contact person,

If the company is reporting new hires on behalf of subsidiaries operating under different names and FEINs, list the names and FEINs, as well as the states where those subsidiaries have employees working.  This notification may take place in one of two ways:

  • Register on-line by selecting Multistate Employer Registration for New Hire Reporting, or
  • Download the form and mail or fax to:
    Department of Health and Human Services
    Administration for Children and Families
    Office of Child Support Enforcement
    Multistate Employer Notification
    P.O. Box 509
    Randallstown, MD 21133
    Fax: (410) 277-9325

Multi-state employers can receive assistance with registration as a multi-state employer from the Multi-state Help Desk by calling (410) 277-9470, 9:00 am – 5:00 pm, Eastern Time.

Please Note: If your company experiences a merger, aquisition or other change that might affect the reporting requirement in the future, please re-visit our website to update your information.

New Hire and the FPLS
The Federal Parent Locator Service (FPLS), a national location system operated by the Federal Office of Child Support Enforcement (OCSE) to assist states in locating noncustodial parents, putative fathers, and custodial parties, includes two databases:

  • National Directory of New Hires (NDNH): a central repository of employment, unemployment insurance claimant data, and quarterly wage data from State Directories of New Hires, State workforce agencies, and federal agencies; and
  • Federal Case Registry (FCR): a national database that contains information on individuals in child support cases and child support orders.

The FPLS works in two ways to support state IV-D child support operations in identifying home and work addresses and sources of income and assets:

First, using a process known as proactive matching, the FPLS compares data from the NDNH to data in the FCR. When there is a match, the FPLS automatically provides new hire, quarterly wage, or unemployment claimant information on custodial and noncustodial parents to any state with a related child support case. The state child support agency uses this information to establish or modify a child support order, or enforce (through income withholding) an existing order.

Second, at the request of a state child support agency’s State Parent Locator Service, the FPLS will search external federal agency databases in an attempt to locate noncustodial parents and/or their assets, for the purpose of establishing or enforcing a child support order. The FPLS has access to external locate sources such as the Internal Revenue Service, the Social Security Administration, Department of Veterans Affairs, the Department of Defense, and the Federal Bureau of Investigation.