On July 1, 2011 a memorandum titled “Interim Guidance for Conducting Trust Fund Recovery Penalty Investigations in Cases Involving a Third-Party Payer” was issued. This memo expands the range of one’s view as to “responsible persons.
” Under IRC Section 6672, third-party payers, such as Payroll Service Providers and Professional Employer Organizations (PEOs) that fail to pay over to the IRS withheld payroll taxes are included. This memo is consistent with the recommendations made by the IRS National Taxpayer Advocate in her 2004 report to congress regarding protecting businesses from misappropriations by Payroll Service Providers. The Small Business/Self Employed Division (SB/SE) memorandum SBSE-05-0711-044 opens the door to collecting the withheld payroll taxes from Payroll Service Providers and PEOs that fail to pay over such taxes. More importantly, officers, directors, employees, and owners of Payroll Service Providers and PEOs who are responsible persons may be personally liable for the TFRP.
Since the memo, it makes sense, more than ever for independent payroll service bureaus to outsource all or some of this risk to a trusted third party tax provider. Two important benefits to look for with any third party tax provider is their layer of protection. Do they have a multi-million dollar fidelity bond? Is the third party payroll processor SAS 70 II or SSAE16 audited? As of June 15, 2011, SSAE 16 replaces the SAS 70 audits.
Payroll Tax Management is a third party tax provider and offers an array of tax, pay, and file services to corporate employers, as well as payroll service bureaus across the nation. PTM has both the benefit of a fifty million dollar fidelity bond and annual SAS 70 audits.