At a recent client board meeting I was asked how an organization would know if their payroll service provider was remitting the payroll taxes on their behalf. In light of recent press coverage about a municipality and other organizations whose payroll service providers did not remit the payroll taxes, it got me thinking about how organizations can best protect themselves from this happening to them.

If your organization uses a service provider to process your payroll and remit your payroll taxes, make sure your service provider is reputable. We’ve all seen the small “no-name” mom and pop payroll service providers fail to remit payroll taxes and make the front page of the paper. Using a well-known and reputable payroll service provider is critical to protecting your organization. They will come with brand reputation, references and most importantly, a report on the internal controls for their service organization (SOC 1 report). While these criteria alone do not guarantee the safety of your organization, they help to evaluate the payroll provider. The SOC 1 report describes the relevant user controls in place at the payroll service organization and also describes the complementary end user controls that should be established.

A reputable payroll service provider will also use the Electronic Federal Tax Payment System (EFTPS) to remit federal taxes. Using EFTPS allows the organization to verify payments are being remitted to the federal taxing authority. Lastly, you should never allow your address of record with the taxing authorities to be changed to that of your payroll service provider. Notices and other communications from the taxing authorities should be sent directly to you so you are aware of late payments, non-payment and other information. Management of your organization needs to understand what they should be on the lookout for and when to be concerned about a notice.

Learn how Mercadien can help you ensure that your taxes are being remitted by contacting me at 609-689-9700 or kneeld@mercadien.com.