An outside payroll firms can be penalized for not turning over trust fund taxes, in a timely fashion, according to the IRS. It will assess the 100% penalty on employee leasing companies and the like that willfully fail to remit payroll taxes.
Utilizing an outside payroll service does not relinquish the company from liability. The IRS can still go after them if their agents abscond with the employment taxes.
If your firm uses a payroll agent, take these steps to protect your company: verify that the agent has posted a fiduciary bond. Insist that copies of all correspondence from the Revenue Service regarding your payroll taxes be sent to you as well as the agent. Remember that all tax deposits now need to be made electronically so it is easier to check your bank statement to verify that the payments were made.
If you are essentially leasing employees and they are not on your payroll the actual employer is responsible for all taxes and all reporting.