Outsourcing the payroll function can provide many benefits, but there are also risks associated with outsourcing. The IRS (www.irs.gov) provides information on outsourcing payroll duties for employers who outsource the payroll function (search for “payroll outsourcing”). The IRS also provides information on employment tax fraud investigations (search for “employment tax fraud”).

Required
a. If the third party makes the payroll tax payments, are they responsible for any deficiencies or failure to make payments?
b. What should be the employer address used for correspondence with the IRS? Why do you think this provision exists?
c. Read the fiscal year 2009 investigation entitled “Former Owner of Payroll Company Sentenced to 10 Years in Prison.” What was the number of clients and the amount of payroll taxes that this payroll operator was charged with failing to remit.
d. Review other investigations in 2010 and 2009. Are there other cases of fraud involving payroll service providers?