Most full service payroll products do calculate, file, and remit federal and state payroll taxes, and vendors describe it in exactly those terms: Paychex states that it automatically calculates, files, and pays payroll taxes covering federal, state, and local obligations [10]. The legal responsibility does not move with the work, because the IRS treats the employer as ultimately responsible for the deposit and payment of federal tax liabilities and says you remain responsible if the third party fails to perform a required action [1][3]. Only two arrangements shift that liability: a Section 3504 agent becomes liable alongside you, and a certified professional employer organization is treated as the employer, and therefore solely liable, for wages it pays your worksite employees [2][7]. Coverage in practice also stops short of many municipal taxes and state paid leave programs, and it depends on account numbers and rates that you supply [11][13][14]. Treat this as general information rather than tax or legal advice.
\n","summary":"Full service payroll plans do calculate withholding, file the returns, and send the deposits for federal and most state taxes, though IRS rules keep the employer responsible for both. Self service tiers only calculate. Municipal taxes, state paid leave programs, and new state registrations often fall outside scope, and unpaid withheld tax can reach individuals through the Trust Fund Recovery Penalty.","publishedAt":"2026-07-20T21:30:13.193","verifiedAt":"2026-07-20T00:00:00","editorialStatus":"APPROVED","lastReviewedAt":"2026-07-20T00:00:00","nextReviewDueAt":"2026-10-20T00:00:00","templateVersion":"v2","aliases":["Does payroll software file my payroll taxes for me?","Does full service payroll include tax filing and deposits?","Am I still responsible for payroll taxes if I use a payroll company?","Who is liable if my payroll provider does not pay my payroll taxes?","What is the difference between full service and self service payroll?","Does payroll software file local and municipal payroll taxes?","Reporting agent vs Section 3504 agent vs CPEO liability","What happens if my payroll provider files payroll taxes late?","How do I verify my payroll taxes were actually filed?","Does a PEO take over my payroll tax liability?","What does a payroll tax penalty guarantee actually cover?","Do I still need my own EIN and state tax accounts with payroll software?"],"confidenceScore":92,"confidenceLabel":"High","canonicalUrl":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"contributorOrganizationProfile":{"entityId":"ec39deab-44fe-48d8-9029-fefe993ab85a","legalName":null,"description":null,"websiteUrl":null,"imageUrl":null,"slogan":null,"subtitle":null,"facts":[],"coiNote":null,"foundingDate":null,"numberOfEmployeesText":null,"contactPoint":null,"address":null,"headquartersText":null,"organizationType":null},"contributorPerson":{"slug":"answerstack-editorial-team","displayName":"AnswerStack Editorial Team"},"sections":[{"id":"be658e16-5b48-41ee-96c0-74100efba93b","sectionKey":"full_service_scope","sectionType":"markdown_section","heading":"What does full service payroll tax filing actually include?","introMarkdown":"Full service payroll tax filing means the provider calculates withholding on every pay run, transmits the deposits on the schedule the law sets, and files the periodic employment tax returns such as Form 941 and Form 940 [2][4]. Paychex tells buyers it automatically calculates, files, and pays payroll taxes across federal, state, and local obligations, and that it manages withholding and remittance for every state where employees work [10]. OnPay advertises federal, state, and local filings alongside FICA, FUTA, SUTA, and Form 941 [12]. Those descriptions are accurate about the work performed, and they say nothing about who the agency bills if it goes wrong.\n\n### The plan tier decides how much is automated\n\nSelf service tiers stop at the calculation and hand you the numbers. Patriot Software publishes both models side by side, with Basic Payroll at $17 per month plus $4 per worker listing no tax filing features at all, while Full Service Payroll at $37 per month plus $5 per worker lists federal, state, and local tax filings and deposits, year end filings at no extra fee, and a $12 charge for each additional state the provider files in [11]. Check which of the two your contract names before assuming a return is going out.\n\n### Whose employer identification number appears on the return\n\nMost payroll products operate as a reporting agent, which means they file a separate return for each client under that client's own employer identification number once the client signs Form 8655 [2]. A smaller group operates as a Section 3504 agent under Form 2678, or as a certified professional employer organization under Form 8973, and both of those file aggregate returns under the provider's own EIN covering many clients at once [2]. Whichever form you signed at onboarding determines who the IRS pursues when a deposit is short.","introHtml":"Full service payroll tax filing means the provider calculates withholding on every pay run, transmits the deposits on the schedule the law sets, and files the periodic employment tax returns such as Form 941 and Form 940 [2][4]. Paychex tells buyers it automatically calculates, files, and pays payroll taxes across federal, state, and local obligations, and that it manages withholding and remittance for every state where employees work [10]. OnPay advertises federal, state, and local filings alongside FICA, FUTA, SUTA, and Form 941 [12]. Those descriptions are accurate about the work performed, and they say nothing about who the agency bills if it goes wrong.
\nSelf service tiers stop at the calculation and hand you the numbers. Patriot Software publishes both models side by side, with Basic Payroll at $17 per month plus $4 per worker listing no tax filing features at all, while Full Service Payroll at $37 per month plus $5 per worker lists federal, state, and local tax filings and deposits, year end filings at no extra fee, and a $12 charge for each additional state the provider files in [11]. Check which of the two your contract names before assuming a return is going out.
\nMost payroll products operate as a reporting agent, which means they file a separate return for each client under that client's own employer identification number once the client signs Form 8655 [2]. A smaller group operates as a Section 3504 agent under Form 2678, or as a certified professional employer organization under Form 8973, and both of those file aggregate returns under the provider's own EIN covering many clients at once [2]. Whichever form you signed at onboarding determines who the IRS pursues when a deposit is short.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":10},{"id":"cc63d361-4940-4d7f-998e-db06dbe6643f","sectionKey":"liability_table","sectionType":"table_section","heading":"Who is legally liable for payroll taxes under each arrangement?","introMarkdown":"The IRS publishes a comparison of third party payer arrangements, and the liability column is the one that matters to you [2]. Each row is explained underneath.","introHtml":"The IRS publishes a comparison of third party payer arrangements, and the liability column is the one that matters to you [2]. Each row is explained underneath.
\n","outroMarkdown":"Nearly every product sold as payroll software operates as a payroll service provider or a reporting agent, which is why the default answer is that you keep the liability [2].","outroHtml":"Nearly every product sold as payroll software operates as a payroll service provider or a reporting agent, which is why the default answer is that you keep the liability [2].
\n","contentJson":{"rows":[{"cells":["No third party, you file","Yours","None","You, in full [3]"]},{"cells":["Payroll service provider (PSP)","Yours","No IRS form required","You, in full [2]"]},{"cells":["Reporting agent","Yours, filed separately for each client","Form 8655","You; the agent should tell you so in writing [2][8]"]},{"cells":["Section 3504 agent","The agent's, on an aggregate return","Form 2678","You and the agent, together [2]"]},{"cells":["Certified professional employer organization","The CPEO's, on an aggregate return","Form 8973","The CPEO alone, for wages it pays your worksite employees [2][7]"]},{"cells":["Noncertified PEO","Depends on the contract","None recognized for this purpose","You; using a PEO generally does not relieve the obligation [7]"]}],"columns":["Arrangement","EIN on the return","IRS authorization","Who is liable to the IRS"]},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":20},{"id":"8c60e6d7-10d9-47c8-9170-1ec93092f46e","sectionKey":"arrangement_types","sectionType":"markdown_section","heading":"How does each arrangement change who answers to the IRS?","introMarkdown":"### Payroll service provider\n\nA payroll service provider prepares returns and makes deposits under your EIN with no IRS authorization form required, and every obligation stays with you [2]. Because the IRS holds no record that anyone else was involved, ask for deposit confirmations after each pay cycle and keep them the way you would keep a bank statement.\n\n### Reporting agent\n\nA reporting agent files a separate return for each client under that client's own EIN, generally by electronic filing, after the client signs Form 8655 [2]. The IRS says a reporting agent must use the Electronic Federal Tax Payment System for deposits and must give the employer a written statement confirming that the employer, and not the agent, is responsible for filing returns and paying taxes on time [8]. If your provider has never handed you that statement, request it, since its absence usually means nobody walked you through where the responsibility sits.\n\n### Section 3504 agent\n\nA Section 3504 agent is appointed on Form 2678 and agrees to take on liability together with you for federal income tax withholding and the Social Security and Medicare pieces, filing one aggregate return per period under its own EIN for all the employers it represents [2]. Shared liability improves your position without removing you from the assessment, and the arrangement shows up mostly in household employment and in some government and nonprofit settings.\n\n### Certified professional employer organization\n\nA certified professional employer organization is treated by statute as the employer of your worksite employees for the wages it pays them, so it carries sole liability for those federal employment taxes and files aggregate returns under its own EIN [2][7]. Certification is granted and withdrawn by the IRS, which publishes listings of certified organizations that employers can check before relying on the arrangement [8]. The boundary sits at wages the CPEO actually remits, not wages you pay directly outside the contract [7].\n\n### Noncertified PEO\n\nA noncertified PEO can perform the same operational work without changing your position with the IRS, and the agency states that a client generally is not relieved of its employment tax obligation for wages paid to its employees by using a PEO [7]. Coemployment is a commercial and state law concept that federal tax law does not recognize in the way marketing materials often imply [7]. If liability transfer is your reason for considering a PEO, confirm in writing whether the organization is certified, because that word carries the legal weight.","introHtml":"A payroll service provider prepares returns and makes deposits under your EIN with no IRS authorization form required, and every obligation stays with you [2]. Because the IRS holds no record that anyone else was involved, ask for deposit confirmations after each pay cycle and keep them the way you would keep a bank statement.
\nA reporting agent files a separate return for each client under that client's own EIN, generally by electronic filing, after the client signs Form 8655 [2]. The IRS says a reporting agent must use the Electronic Federal Tax Payment System for deposits and must give the employer a written statement confirming that the employer, and not the agent, is responsible for filing returns and paying taxes on time [8]. If your provider has never handed you that statement, request it, since its absence usually means nobody walked you through where the responsibility sits.
\nA Section 3504 agent is appointed on Form 2678 and agrees to take on liability together with you for federal income tax withholding and the Social Security and Medicare pieces, filing one aggregate return per period under its own EIN for all the employers it represents [2]. Shared liability improves your position without removing you from the assessment, and the arrangement shows up mostly in household employment and in some government and nonprofit settings.
\nA certified professional employer organization is treated by statute as the employer of your worksite employees for the wages it pays them, so it carries sole liability for those federal employment taxes and files aggregate returns under its own EIN [2][7]. Certification is granted and withdrawn by the IRS, which publishes listings of certified organizations that employers can check before relying on the arrangement [8]. The boundary sits at wages the CPEO actually remits, not wages you pay directly outside the contract [7].
\nA noncertified PEO can perform the same operational work without changing your position with the IRS, and the agency states that a client generally is not relieved of its employment tax obligation for wages paid to its employees by using a PEO [7]. Coemployment is a commercial and state law concept that federal tax law does not recognize in the way marketing materials often imply [7]. If liability transfer is your reason for considering a PEO, confirm in writing whether the organization is certified, because that word carries the legal weight.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":30},{"id":"5ded7263-1c04-4d96-bfaa-62534b3b3adc","sectionKey":"not_covered","sectionType":"markdown_section","heading":"Which payroll taxes and duties does the software commonly leave to you?","introMarkdown":"### Local and municipal taxes\n\nLocal tax coverage is the most common gap, and it varies by product, plan, and jurisdiction. Pennsylvania requires employers with worksites in the state to withhold and remit the local Earned Income Tax and the Local Services Tax for employees working there, both administered outside the state income tax system [13]. Providers that advertise local tax filing usually mean a defined list of jurisdictions, so ask for the list covering the cities and school districts where your people work.\n\n### State paid leave and other program specific accounts\n\nState paid family and medical leave programs run on their own accounts and their own reporting calendars. Washington requires employers of every size to collect premiums and submit reports to the state each quarter, and it treats third party administration as a separate arrangement in which an employer agent holds an agreement to manage the reporting and premium payments [14]. Authorizing your payroll provider inside its own dashboard does not always create that agreement with the state agency, so confirm it on the agency side.\n\n### Registration in a new state\n\nYou generally have to register the business and obtain withholding and unemployment account numbers before a provider can file anything in a new state. Patriot's published pricing charges $12 per month for each additional state it files in, which is a useful reminder that state coverage gets added deliberately rather than automatically [11]. Build that lead time into any plan to hire remotely in a new state.\n\n### Your EIN, account numbers, rates, and deposit frequency\n\nProviders file with the identifiers and rates you give them, and stale values produce correct looking returns that land in the wrong place. Your federal deposit schedule is redetermined before each calendar year using a four quarter lookback period, with more than $50,000 of reported tax making you a semiweekly depositor, and a $100,000 liability accumulated on any single day moving a monthly depositor to semiweekly the next day [4]. Enter the new state unemployment rate before the first pay run of the year, since those rates are reissued annually.","introHtml":"Local tax coverage is the most common gap, and it varies by product, plan, and jurisdiction. Pennsylvania requires employers with worksites in the state to withhold and remit the local Earned Income Tax and the Local Services Tax for employees working there, both administered outside the state income tax system [13]. Providers that advertise local tax filing usually mean a defined list of jurisdictions, so ask for the list covering the cities and school districts where your people work.
\nState paid family and medical leave programs run on their own accounts and their own reporting calendars. Washington requires employers of every size to collect premiums and submit reports to the state each quarter, and it treats third party administration as a separate arrangement in which an employer agent holds an agreement to manage the reporting and premium payments [14]. Authorizing your payroll provider inside its own dashboard does not always create that agreement with the state agency, so confirm it on the agency side.
\nYou generally have to register the business and obtain withholding and unemployment account numbers before a provider can file anything in a new state. Patriot's published pricing charges $12 per month for each additional state it files in, which is a useful reminder that state coverage gets added deliberately rather than automatically [11]. Build that lead time into any plan to hire remotely in a new state.
\nProviders file with the identifiers and rates you give them, and stale values produce correct looking returns that land in the wrong place. Your federal deposit schedule is redetermined before each calendar year using a four quarter lookback period, with more than $50,000 of reported tax making you a semiweekly depositor, and a $100,000 liability accumulated on any single day moving a monthly depositor to semiweekly the next day [4]. Enter the new state unemployment rate before the first pay run of the year, since those rates are reissued annually.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":40},{"id":"cd40efbb-202c-4e61-9dfb-dd9fe456c205","sectionKey":"late_or_wrong","sectionType":"markdown_section","heading":"What happens if the provider deposits or files late?","introMarkdown":"The penalty is assessed against your account, and it escalates with the delay. Under 26 U.S.C. 6656 the failure to deposit penalty runs at 2 percent when the deposit is not more than 5 days late, 5 percent for more than 5 days but not more than 15, and 10 percent beyond 15 days, rising to 15 percent once the tax remains unpaid through the earlier of 10 days after the first delinquency notice or the day of a notice and demand for immediate payment [6]. The IRS states that if a third party fails to make the federal tax payments, it may assess penalties and interest on the employer's account [1].\n\nUnpaid withheld tax carries a further exposure that reaches individuals. The Trust Fund Recovery Penalty allows the unpaid income tax withheld plus the employee share of FICA to be assessed personally against a responsible person who willfully failed to pay it over, in an amount equal to the unpaid balance of that trust fund tax [5]. A responsible person is anyone with the duty to perform and the power to direct the collecting, accounting, and paying of those taxes, and the IRS includes officers, directors, shareholders, and employees, along with payroll service providers and professional employer organizations and responsible parties within them [5]. Willfulness here does not require bad motive, since awareness of the outstanding tax plus intentional disregard or plain indifference is enough [5].\n\nIRS guidance says a red flag should go up the first time a service provider misses a payment or makes a late payment, and it notes prosecutions of parties that operated under the appearance of a payroll service provider and stole funds intended for employment taxes [1].","introHtml":"The penalty is assessed against your account, and it escalates with the delay. Under 26 U.S.C. 6656 the failure to deposit penalty runs at 2 percent when the deposit is not more than 5 days late, 5 percent for more than 5 days but not more than 15, and 10 percent beyond 15 days, rising to 15 percent once the tax remains unpaid through the earlier of 10 days after the first delinquency notice or the day of a notice and demand for immediate payment [6]. The IRS states that if a third party fails to make the federal tax payments, it may assess penalties and interest on the employer's account [1].
\nUnpaid withheld tax carries a further exposure that reaches individuals. The Trust Fund Recovery Penalty allows the unpaid income tax withheld plus the employee share of FICA to be assessed personally against a responsible person who willfully failed to pay it over, in an amount equal to the unpaid balance of that trust fund tax [5]. A responsible person is anyone with the duty to perform and the power to direct the collecting, accounting, and paying of those taxes, and the IRS includes officers, directors, shareholders, and employees, along with payroll service providers and professional employer organizations and responsible parties within them [5]. Willfulness here does not require bad motive, since awareness of the outstanding tax plus intentional disregard or plain indifference is enough [5].
\nIRS guidance says a red flag should go up the first time a service provider misses a payment or makes a late payment, and it notes prosecutions of parties that operated under the appearance of a payroll service provider and stole funds intended for employment taxes [1].
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":50},{"id":"b8f84c4a-04d7-47d2-b4f4-5bf250b2a5f5","sectionKey":"verify_steps","sectionType":"markdown_section","heading":"How do you verify your payroll taxes are actually being filed and paid?","introMarkdown":"Verification takes about twenty minutes a quarter once the accounts exist. The steps below follow IRS guidance for employers who use a third party.\n\n1. Enroll the business in EFTPS under your own EIN and obtain your own inquiry PIN. The IRS recommends this so employers can periodically verify the payments made on their behalf, and the free system shows 15 months of payment history online [1][9]. New enrollments can take up to five business days to process [9].\n\n2. Keep the IRS address of record as your own. The IRS advises against changing your address to the payroll service provider's address, because doing so may significantly limit your ability to be informed about tax matters involving your business [1]. Notices about a missed deposit are only useful if they reach you.\n\n3. Ask for a copy of every filed return and its acknowledgment, then reconcile the four quarterly Forms 941 and the annual Form 940 against your own payroll registers [4]. A discrepancy caught in one quarter costs far less than one found at year end against the W-2 totals.\n\n4. Recheck your deposit schedule each year rather than assuming it carried over, since the monthly and semiweekly determination is made fresh from the previous lookback period [4].\n\n5. Log in to your state withholding, unemployment, and paid leave accounts directly [14]. Third party access is convenient, and it also means your only view of your own compliance runs through the party you are checking on.\n\n6. Get the arrangement in writing. Reporting agents are expected to provide a written statement that the employer, not the agent, is responsible for timely filing and payment, and CPEO status can be confirmed against the public listings the IRS maintains [8].","introHtml":"Verification takes about twenty minutes a quarter once the accounts exist. The steps below follow IRS guidance for employers who use a third party.
\nEnroll the business in EFTPS under your own EIN and obtain your own inquiry PIN. The IRS recommends this so employers can periodically verify the payments made on their behalf, and the free system shows 15 months of payment history online [1][9]. New enrollments can take up to five business days to process [9].
\nKeep the IRS address of record as your own. The IRS advises against changing your address to the payroll service provider's address, because doing so may significantly limit your ability to be informed about tax matters involving your business [1]. Notices about a missed deposit are only useful if they reach you.
\nAsk for a copy of every filed return and its acknowledgment, then reconcile the four quarterly Forms 941 and the annual Form 940 against your own payroll registers [4]. A discrepancy caught in one quarter costs far less than one found at year end against the W-2 totals.
\nRecheck your deposit schedule each year rather than assuming it carried over, since the monthly and semiweekly determination is made fresh from the previous lookback period [4].
\nLog in to your state withholding, unemployment, and paid leave accounts directly [14]. Third party access is convenient, and it also means your only view of your own compliance runs through the party you are checking on.
\nGet the arrangement in writing. Reporting agents are expected to provide a written statement that the employer, not the agent, is responsible for timely filing and payment, and CPEO status can be confirmed against the public listings the IRS maintains [8].
\nA tax penalty guarantee is a contractual promise from the vendor to you, and it changes nothing about who the taxing agency assesses. Patriot markets its full service plan with tax filing reliability guaranteed, and OnPay markets an accuracy guarantee attached to its automatic tax debits [11][12]. Both statements sit on marketing pages, while the caps, conditions, and exclusions live in the service agreement.
\nThe service agreement is where the cap and the conditions live. Reimbursement is often limited to an annual dollar figure per business, so a large assessment can exceed the cover. The conditions usually turn on the accuracy and timeliness of the data and funds you supplied, so a wrong state unemployment rate or a late funding transfer can put the fault back on your side. Many agreements also set a short deadline for forwarding an agency notice, counted from the date printed on it, and that clock only works if notices still arrive at your address rather than the vendor's [1].
\nUnderneath all of it, the IRS holds the employer responsible for ensuring returns are filed and deposits are made even when a third party performs those acts [3][4]. A guarantee can reimburse a penalty after the fact without preventing the assessment from being issued in your name.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":70},{"id":"3d571e27-8c85-4366-bd81-e7db788cc30d","sectionKey":"contributor_perspective","sectionType":"markdown_section","heading":"How this answer was researched","introMarkdown":"This entry was assembled from primary tax authority rather than vendor marketing, because the distance between what payroll products advertise and what the law assigns is the substance of the question. The liability rules come from IRS guidance on outsourcing payroll duties, the IRS third party arrangement chart, Publication 15 for 2026, the March 2026 revision of the Form 941 instructions, and the statutory deposit penalty at 26 U.S.C. 6656. Product scope and pricing come from vendor pages opened and read on the verification date shown, not from review sites. No arrangement was tested inside a live payroll environment, so coverage of specific municipalities and state programs should be confirmed against your own service agreement. Payroll practitioners, CPAs, enrolled agents, and vendor compliance teams are invited to submit corrections, jurisdiction specific detail, or contract language that would change any conclusion here. This is general information and not tax or legal advice.","introHtml":"This entry was assembled from primary tax authority rather than vendor marketing, because the distance between what payroll products advertise and what the law assigns is the substance of the question. The liability rules come from IRS guidance on outsourcing payroll duties, the IRS third party arrangement chart, Publication 15 for 2026, the March 2026 revision of the Form 941 instructions, and the statutory deposit penalty at 26 U.S.C. 6656. Product scope and pricing come from vendor pages opened and read on the verification date shown, not from review sites. No arrangement was tested inside a live payroll environment, so coverage of specific municipalities and state programs should be confirmed against your own service agreement. Payroll practitioners, CPAs, enrolled agents, and vendor compliance teams are invited to submit corrections, jurisdiction specific detail, or contract language that would change any conclusion here. This is general information and not tax or legal advice.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":"This answer was written and reviewed by the AnswerStack Editorial Team, which has no commercial stake in the products, companies, or methods discussed. Every claim is cited inline and verified on the dates shown.","noteHtml":"This answer was written and reviewed by the AnswerStack Editorial Team, which has no commercial stake in the products, companies, or methods discussed. Every claim is cited inline and verified on the dates shown.
\n","sortOrder":80},{"id":"df8e8f5a-8ee4-4d6a-9329-2a3761bd6553","sectionKey":"what_it_is_not","sectionType":"markdown_section","heading":"What automatic payroll tax filing is not","introMarkdown":"### It is not a transfer of legal liability\n\nOutsourcing the work leaves the obligation where it started for every arrangement except a Section 3504 agent, which shares it, and a certified PEO, which takes it for the wages it remits [2][7].\n\n### It is not coverage of every jurisdiction\n\nFederal coverage is close to universal across full service products, while state coverage is priced per state and local coverage is a defined list [11][13]. Read the list rather than the headline.\n\n### It is not a substitute for your own registrations\n\nEmployer accounts with state revenue, unemployment, and paid leave agencies are opened in your name, and a state program may require its own authorization before a third party can report and pay for you [14].\n\n### It is not tax advice\n\nA payroll product applies the rates and rules configured in it against the data you enter. Worker classification, multistate nexus, benefit taxability, and any assessment already issued belong with a CPA or a tax attorney. Nothing on this page is tax or legal advice.","introHtml":"Outsourcing the work leaves the obligation where it started for every arrangement except a Section 3504 agent, which shares it, and a certified PEO, which takes it for the wages it remits [2][7].
\nFederal coverage is close to universal across full service products, while state coverage is priced per state and local coverage is a defined list [11][13]. Read the list rather than the headline.
\nEmployer accounts with state revenue, unemployment, and paid leave agencies are opened in your name, and a state program may require its own authorization before a third party can report and pay for you [14].
\nA payroll product applies the rates and rules configured in it against the data you enter. Worker classification, multistate nexus, benefit taxability, and any assessment already issued belong with a CPA or a tax attorney. Nothing on this page is tax or legal advice.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":90}],"citations":[{"title":"Outsourcing payroll duties","url":"https://www.irs.gov/businesses/small-businesses-self-employed/outsourcing-payroll-duties","excerpt":"The employer is ultimately responsible for the deposit and payment of federal tax liabilities.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Employer is ultimately responsible for deposit and payment of federal tax liabilities; IRS may assess penalties and interest on the employer's account if the third party fails to pay; EFTPS inquiry PIN recommendation; keep your own address of record; red flag on a first missed or late payment; prose","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"Third party arrangement chart","url":"https://www.irs.gov/businesses/small-businesses-self-employed/third-party-arrangement-chart","excerpt":"The Section 3504 agent agrees to assume liability along with the employer; the CPEO is solely liable for paying employment taxes on wages it pays work site employees.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Comparison of PSP, reporting agent, Section 3504 agent, and CPEO: whose EIN is used, Forms 8655, 2678, and 8973, aggregate versus per client returns, and who is liable for employment taxes under each arrangement.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"Publication 15 (2026), (Circular E), Employer's Tax Guide","url":"https://www.irs.gov/publications/p15","excerpt":"As an employer, you're responsible to ensure that tax returns are filed and deposits and payments are made, even if you contract with a third party to perform these acts. You remain responsible if the third party fails to perform any required action.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Employer responsibility to ensure returns are filed and deposits and payments are made even when a third party is contracted; employer remains responsible if the third party fails to perform.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"Instructions for Form 941 (Rev. March 2026)","url":"https://www.irs.gov/instructions/i941","excerpt":"Generally, as an employer, you're responsible to ensure that tax returns are filed and deposits and payments are made, even if you contract with a third party to perform these acts.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Employer responsibility despite a third party; four quarter lookback period; $50,000 threshold separating monthly and semiweekly depositors; $100,000 next day deposit rule; quarterly Form 941 and annual Form 940 filings.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"Employment taxes and the Trust Fund Recovery Penalty (TFRP)","url":"https://www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp","excerpt":"The amount of the penalty is equal to the unpaid balance of the trust fund tax.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Definition of a responsible person including payroll service providers and professional employer organizations and responsible parties within them; the willfulness standard; the penalty equals the unpaid withheld income tax plus the employee share of FICA.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"26 U.S.C. 6656, Failure to make deposit of taxes","url":"https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section6656&num=0&edition=prelim","excerpt":"2 percent if the failure is for not more than 5 days, 5 percent if the failure is for more than 5 days but not more than 15 days, 10 percent if the failure is for more than 15 days.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Statutory failure to deposit penalty tiers of 2, 5, 10, and 15 percent and the corresponding day thresholds and notice triggers.","domain":"uscode.house.gov","publisherName":"Office of the Law Revision Counsel, U.S. House of Representatives"},{"title":"Third party payer arrangements: Professional Employer Organizations","url":"https://www.irs.gov/government-entities/third-party-payer-arrangements-professional-employer-organizations","excerpt":"Generally, the CLE is not relieved of its employment tax obligation with regard to wages paid to its employees by using a PEO.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"A client is generally not relieved of its employment tax obligation by using a PEO; coemployment is not recognized under federal tax law; a CPEO under section 3511 is treated as the employer of work site employees.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"Picking the right third-party payroll service provider helps protect businesses","url":"https://www.irs.gov/newsroom/picking-the-right-third-party-payroll-service-provider-helps-protect-businesses","excerpt":"Employers are legally responsible for reporting and paying the taxes due, even if it sent funds to the third-party payroll service provider.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Employers remain legally responsible even after sending funds to a provider; reporting agents must use EFTPS and provide a written statement that the employer is responsible for filing and paying on time; CPEOs are listed publicly on IRS.gov; EFTPS enrollment lets employers monitor deposits.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"EFTPS: The Electronic Federal Tax Payment System","url":"https://www.irs.gov/payments/eftps-the-electronic-federal-tax-payment-system","excerpt":"EFTPS is a free system offered by the U.S. Department of Treasury to pay your federal taxes.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"EFTPS is a free Treasury system for federal tax payments; businesses may enroll online or by phone; new enrollments can take up to five business days; users can view 15 months of payment history.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"Payroll tax services","url":"https://www.paychex.com/payroll-taxes","excerpt":"We automatically calculate, file, and pay your payroll taxes for you.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Vendor claim that the service automatically calculates, files, and pays payroll taxes covering federal, state, and local obligations and manages withholding and remittance for every state where employees work.","domain":"paychex.com","publisherName":"Paychex"},{"title":"Payroll Software Pricing","url":"https://www.patriotsoftware.com/payroll/pricing/","excerpt":"Federal tax filings & deposits, State tax filings & deposits, Local tax filings & deposits.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Basic Payroll at $17 per month plus $4 per worker with no tax filing features listed; Full Service Payroll at $37 per month plus $5 per worker including federal, state, and local tax filings and deposits and year end filings; $12 fee per additional state filed in; tax filing reliability guaranteed.","domain":"patriotsoftware.com","publisherName":"Patriot Software"},{"title":"Payroll tax management software","url":"https://onpay.com/payroll/software/payroll-tax-management-software/","excerpt":"Backed by 30+ years of payroll expertise and an accuracy guarantee, our team automatically debits payroll taxes when they're due.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Vendor claim of automatic tax debits with an accuracy guarantee covering federal, state, quarterly and annual filings, local taxes, FICA, FUTA, SUTA, and Form 941.","domain":"onpay.com","publisherName":"OnPay"},{"title":"Local income tax information (Act 32)","url":"https://dced.pa.gov/local-government/local-income-tax-information/","excerpt":"Employers with worksites located in Pennsylvania are required to withhold and remit the local Earned Income Tax (EIT) and Local Services Tax (LST) on behalf of their employees working in PA.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Employers with worksites in Pennsylvania must withhold and remit the local Earned Income Tax and Local Services Tax for employees working in the state, separate from state income tax.","domain":"dced.pa.gov","publisherName":"Pennsylvania Department of Community and Economic Development"},{"title":"Paid Family and Medical Leave: employers","url":"https://paidleave.wa.gov/employers/","excerpt":"Employers of every size are required to collect premiums and submit reports to the state each quarter.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-20T00:00:00","supportsText":"Employers of every size must collect premiums and submit quarterly reports to the state; an employer agent or third party administrator manages Paid Leave reporting and premium payments under a separate agreement.","domain":"paidleave.wa.gov","publisherName":"Washington State Employment Security Department"}],"revisions":[],"relatedAnswers":[{"id":"479cfc63-1ffd-436f-ac4a-a8b190d3d1e7","slug":"payroll-software-integrate-with-quickbooks-accounting-and-my-hris","question":"Does payroll software integrate with QuickBooks / accounting and my HRIS?","publishedAt":"2026-07-21T22:08:26.368","confidenceScore":85,"confidenceLabel":"High","industry":{"id":"e1a1da3c-52a8-4e99-88ad-d08ef17d7c3f","slug":"hr-technology","label":"HR Technology","description":"ATS, HRIS, payroll, and workforce management"},"topic":{"slug":"payroll-compensation","label":"Payroll & Compensation","description":"Payroll, Global Payroll, Earned Wage Access, Compensation Management, Pay Equity, Salary Benchmarking, Total Rewards","schemaKind":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"snippet":"Payroll reaches your books one of four ways: built into the same product, a prebuilt two-way connector, a mappable general ledger export, or a manual journal entry. The setup effort is in the account mapping, because every wage type, tax, and deduction has to point at an account that already exists in QuickBooks, Xero, or Sage and match it exactly. On the HR side, payroll is either an HRIS module or a synced separate system, where deduction-code and new-hire mismatches cause most failures.","url":"/q/payroll-software-integrate-with-quickbooks-accounting-and-my-hris"},{"id":"74a84fb8-a1c3-4023-ba17-f547cb248a4d","slug":"whats-the-best-global-payroll-software","question":"What's the best global payroll software, and how do I pay international employees without a legal entity?","publishedAt":"2026-07-21T22:08:23.903","confidenceScore":82,"confidenceLabel":"Medium","industry":{"id":"e1a1da3c-52a8-4e99-88ad-d08ef17d7c3f","slug":"hr-technology","label":"HR Technology","description":"ATS, HRIS, payroll, and workforce management"},"topic":{"slug":"payroll-compensation","label":"Payroll & Compensation","description":"Payroll, Global Payroll, Earned Wage Access, Compensation Management, Pay Equity, Salary Benchmarking, Total Rewards","schemaKind":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"snippet":"The right tool depends on two facts: whether you hold a legal entity in the worker's country, and whether the person is an employee or a genuine contractor. Global payroll platforms consolidate pay runs and filings across entities you already own, split between native single-platform tools and aggregator managed services. Where you have no entity, no payroll software can legally employ someone; an employer of record does that. Genuine contractors are paid through contractor platforms, within worker-classification limits.","url":"/q/whats-the-best-global-payroll-software"},{"id":"f79d3bcd-4e0c-4fcf-a685-38c36f11e489","slug":"what-is-earned-wage-access-how-does-it-work","question":"What is earned wage access, how does it work, and should my company offer it?","publishedAt":"2026-07-21T22:08:21.803","confidenceScore":84,"confidenceLabel":"High","industry":{"id":"e1a1da3c-52a8-4e99-88ad-d08ef17d7c3f","slug":"hr-technology","label":"HR Technology","description":"ATS, HRIS, payroll, and workforce management"},"topic":{"slug":"payroll-compensation","label":"Payroll & Compensation","description":"Payroll, Global Payroll, Earned Wage Access, Compensation Management, Pay Equity, Salary Benchmarking, Total Rewards","schemaKind":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"snippet":"On-demand pay covers two products under one name. Employer-integrated services verify earned wages through payroll and recover advances in the pay run; direct-to-consumer apps estimate earnings from a bank account and debit it on payday, with overdraft risk. Each transfer looks cheap, yet small advances can annualize above 100 percent. Federal law is in flux after the CFPB reversed itself in December 2025, and state rules on fees, disclosure, and no-recourse repayment keep changing.","url":"/q/what-is-earned-wage-access-how-does-it-work"},{"id":"1d3b4dc9-e68b-4914-8f30-a1da81b552b4","slug":"how-do-i-benchmark-salaries-and-build-defensible-pay","question":"How do I benchmark salaries and build defensible pay ranges (pay equity, pay transparency laws)?","publishedAt":"2026-07-21T22:08:19.288","confidenceScore":85,"confidenceLabel":"High","industry":{"id":"e1a1da3c-52a8-4e99-88ad-d08ef17d7c3f","slug":"hr-technology","label":"HR Technology","description":"ATS, HRIS, payroll, and workforce management"},"topic":{"slug":"payroll-compensation","label":"Payroll & Compensation","description":"Payroll, Global Payroll, Earned Wage Access, Compensation Management, Pay Equity, Salary Benchmarking, Total Rewards","schemaKind":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"snippet":"Defensible pay rests on three separate pieces of work. First, a benchmarking method: level your jobs, match them to participated salary surveys by content, age the data to one date, pick a market position, and set midpoints and spreads you track with compa-ratio. Second, a pay-equity test: a regression that controls for legitimate factors and isolates the unexplained gap, usually run under counsel. Third, compliance with pay transparency laws, which now require posted ranges in about 19 US states and reporting in three, with the EU directive due by June 2026.","url":"/q/how-do-i-benchmark-salaries-and-build-defensible-pay"}],"contributorStats":{"verifiedAnswers":224,"openDisputes":0},"schemaJson":{"@context":"https://schema.org","@type":"Question","name":"Does payroll software automatically calculate, file, and pay my payroll taxes?","text":"Does payroll software automatically calculate, file, and pay my payroll taxes?","url":"https://www.answerstack.io/q/payroll-software-automatically-calculate-file-and-pay-my-payroll","answerCount":1,"datePublished":"2026-07-20T21:30:13.193","author":{"@type":"Person","name":"AnswerStack Editorial Team","worksFor":{"@type":"Organization","name":"AnswerStack"},"url":"https://www.answerstack.io/contributors/answer-stack"},"about":[{"@type":"Thing","name":"Payroll & Compensation"},{"@type":"Thing","name":"HR Technology"}],"acceptedAnswer":{"@type":"Answer","text":"Most full service payroll products do calculate, file, and remit federal and state payroll taxes, and vendors describe it in exactly those terms: Paychex states that it automatically calculates, files, and pays payroll taxes covering federal, state, and local obligations [10]. The legal responsibility does not move with the work, because the IRS treats the employer as ultimately responsible for the deposit and payment of federal tax liabilities and says you remain responsible if the third party fails to perform a required action [1][3]. Only two arrangements shift that liability: a Section 3504 agent becomes liable alongside you, and a certified professional employer organization is treated as the employer, and therefore solely liable, for wages it pays your worksite employees [2][7]. Coverage in practice also stops short of many municipal taxes and state paid leave programs, and it depends on account numbers and rates that you supply [11][13][14]. Treat this as general information rather than tax or legal advice.","url":"https://www.answerstack.io/q/payroll-software-automatically-calculate-file-and-pay-my-payroll","upvoteCount":0,"datePublished":"2026-07-20T21:30:13.193","dateModified":"2026-07-20T00:00:00","author":{"@type":"Person","name":"AnswerStack Editorial Team","worksFor":{"@type":"Organization","name":"AnswerStack"},"url":"https://www.answerstack.io/contributors/answer-stack"},"citation":[{"@type":"CreativeWork","name":"Outsourcing payroll duties","url":"https://www.irs.gov/businesses/small-businesses-self-employed/outsourcing-payroll-duties"},{"@type":"CreativeWork","name":"Third party arrangement chart","url":"https://www.irs.gov/businesses/small-businesses-self-employed/third-party-arrangement-chart"},{"@type":"CreativeWork","name":"Publication 15 (2026), (Circular E), Employer's Tax Guide","url":"https://www.irs.gov/publications/p15"},{"@type":"CreativeWork","name":"Instructions for Form 941 (Rev. March 2026)","url":"https://www.irs.gov/instructions/i941"},{"@type":"CreativeWork","name":"Employment taxes and the Trust Fund Recovery Penalty (TFRP)","url":"https://www.irs.gov/businesses/small-businesses-self-employed/employment-taxes-and-the-trust-fund-recovery-penalty-tfrp"},{"@type":"CreativeWork","name":"26 U.S.C. 6656, Failure to make deposit of taxes","url":"https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section6656&num=0&edition=prelim"},{"@type":"CreativeWork","name":"Third party payer arrangements: Professional Employer Organizations","url":"https://www.irs.gov/government-entities/third-party-payer-arrangements-professional-employer-organizations"},{"@type":"CreativeWork","name":"Picking the right third-party payroll service provider helps protect businesses","url":"https://www.irs.gov/newsroom/picking-the-right-third-party-payroll-service-provider-helps-protect-businesses"},{"@type":"CreativeWork","name":"EFTPS: The Electronic Federal Tax Payment System","url":"https://www.irs.gov/payments/eftps-the-electronic-federal-tax-payment-system"},{"@type":"CreativeWork","name":"Payroll tax services","url":"https://www.paychex.com/payroll-taxes"},{"@type":"CreativeWork","name":"Payroll Software Pricing","url":"https://www.patriotsoftware.com/payroll/pricing/"},{"@type":"CreativeWork","name":"Payroll tax management software","url":"https://onpay.com/payroll/software/payroll-tax-management-software/"},{"@type":"CreativeWork","name":"Local income tax information (Act 32)","url":"https://dced.pa.gov/local-government/local-income-tax-information/"},{"@type":"CreativeWork","name":"Paid Family and Medical Leave: employers","url":"https://paidleave.wa.gov/employers/"}]}}}