Which Tax Is Paid To A Third Party - T-Tees - Your Answers Await, Life's Questions Unraveled

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Third parties perform an important service by ensuring that their clients meet filing deadlines, deposit requirements, and payment due dates. However, using a third party doesn’t relieve you, the employer, of your employment tax filing, deposit, and payment obligations.

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Protect your business from tax liabilities caused by a third-party failure

Prevent unauthorized changes of address. A dishonest third party might change your address of record with the IRS to its own address, without your knowledge or consent, to keep you from receiving IRS notices about problems with your account. The law now requires the IRS to send a confirmation of address change to both the employer’s new address and its former address.

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To prevent problems:

Don’t change your address of record to the third party’s address. This can keep you from finding out about tax matters involving your business. Problems often arise when businesses rely solely on the third party to keep them informed of the status of tax deposits and payments.
If you find out your address was changed without your authorization, notify the IRS immediately by calling the number on the letter or bill you receive, writing to the IRS office that sent it, or visiting a local IRS office. If you can’t find your letter or bill, you can call the IRS Business Assistance Line at 800-829-4933.

If you’re concerned that something has happened, call the Business Assistance Line at 800-829-4933 to find out if your business has any unfiled returns, or overdue deposits or payments.

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Be sure your third party uses the Electronic Federal Tax Payment System (EFTPS). EFTPS automatically issues Inquiry PINs to the clients of payroll service providers. This gives you access to the EFTPS account to verify the provider is making timely, accurate deposits and payments for you. You can and should investigate to correct missing or late payments immediately. Once the payroll service provider has your money, there’s no reason it shouldn’t be paid to the IRS.

If you didn’t receive a letter about your Inquiry PIN, you can register on EFTPS to get your PIN and verify payments. When you register, you’ll have online access to 16 months of payment history.

If you’re a victim of a third party payroll tax return preparer

The law now requires the IRS to give special consideration to an offer in compromise from a taxpayer who has been defrauded by a third-party payroll tax return preparer. This is called an Effective Tax Administration (ETA) offer. It may allow you to settle your debt for less than the full amount due, even if you have assets that could pay the balance created by the third party’s actions.

During your first contact with the IRS:

Indicate that your business is a victim of nonpayment by a third-party payroll tax return preparer.
Discuss an offer in compromise as an alternative to IRS collection action.
Ask the revenue officer not to assert the trust fund recovery penalty.

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