Payroll and Employee Leasing Companies Can Create Employment Tax Issues

Like many other small business owners in Tulsa and throughout Oklahoma, you may outsource some of the countless administrative tasks that are associated with your operation. One such task that is often outsourced is payroll. Unfortunately, when responsibility for withholding and paying your employment tax obligations is outsourced, you could find yourself in trouble with the Internal Revenue Service (IRS) if the tax is not paid properly. It is crucial to the financial health of your business that you monitor these third-party vendors appropriately.

How Vendors Can Cause Employment Tax Woes

It is not just payroll service providers that can cause you trouble when it comes to withholding and paying employment taxes. Companies that lease employees to businesses can also create problems. Following is an overview of these two types of vendors:

  • Payroll Service Provider – A payroll service provider is a company that businesses hire to perform such services as producing employee paychecks, filing employment tax returns, and making employment tax payments to the IRS.
  • Professional Employer Organization – A professional employer organization, on the other hand, is a company that offers employees to businesses on a lease basis, handling the administrative, personnel, and payroll accounting functions for these employees.


With both types of organizations, there have been instances where the companies have failed to properly withhold and pay the employment tax that is owed to the IRS. Often, this is discovered when the companies dissolve; clients learn that thousands or even millions of dollars in employment taxes were never paid.

For this reason, it is critical that you carefully select the third party that will handle your company’s employment tax obligations. Check references and conduct due diligence to determine whether the company is reputable. It is also important to look for a company that uses the Electronic Federal Tax Payment System, which allows business owners to verify that the payments were made on their behalf. Another vital tip is to be sure that you do not allow your third-party payroll company to change your business’s address of record with the IRS to that of the third-party payer.

We hope that this article supplied you with valuable advice that you can use to protect your company from potential IRS employment tax problems. If you are interested in learning more, we would love to hear from you! Initiate a live chat with us at any time that is convenient for you.

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