June 2024 Client Profile

Maureen’s yoga center has grown faster than expected, so she’s considering using a third-party service to handle payroll processing and management.

Maureen consulted her tax professional and looked at IRS Tax Tips for guidance. She found she could best protect her business by hiring one of these types of services:

Certified professional employer organizations are generally only liable for filing employment tax returns and making deposits and payments for the taxes their customers report on wages and other compensation.

Reporting agents are generally limited to depositing taxes with the Electronic Federal Tax Payment System (EFTPS). Employers retain responsibility for seeing that filing returns are filed and taxes paid on time.

Section 3504 agents withhold, report, and pay employment taxes and share liability for all federal tax withholding responsibilities with the employer. Employer returns are submitted with the agent's Employer Identity Number (EIN). Generally, customers must still file FUTA tax returns with their EINs.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.