Some businesses take on all payroll tasks themselves: the accounting, writing and distributing checks, figuring and submitting all necessary taxes, and handling other withholdings. Some companies, however, may not have the time to devote to payroll and will outsource payroll tasks to a company that specializing in this area. To the IRS, this company is known as a reporting agent.
The business will need to file a Form 8655, a Reporting Agent Authorization Form, with the Internal Revenue Service. This form establishes the relationship between the company and the reporting agent and authorizes the reporting agent to submit tax returns, make tax deposits, etc., on the company’s behalf.
What a reporting agent does
Form 8655 gives the reporting agent the authority to:
- Prepare and distribute paychecks to the company’s employees.
- Prepare and distribute W-2 forms to the company’s employees.
- Submit some tax returns on behalf of the business, including Form 940 and 941.
- Receive information regarding specific notices, deposit amounts, payment requirements, correspondence, and more. The reporting agent is authorized to receive a copy of any information regarding payroll and tax deposits sent to the client company.
- Make various payments on behalf of the company, including federal tax deposits and other federal payments as necessary. These payments can be made using the Electronic Federal Tax Payment System.
- Submit information regarding payroll and taxes to the IRS on behalf of the company.
- Answer questions and provide additional information as needed to the IRS.
Form 8655 is only one page and is fairly simple and straightforward. A person who is authorized to create legally binding partnerships and execute legal agreements on behalf of the company should complete and sign the document.
Part one of Form 8655 asks for company information, including the Employer Identification Number, taxpayer name (which is not always the same as its trade name), address, contact person, and several other items.
The second part includes much of the same information for the reporting agent.
In the third and fourth parts of the form, the company gives the reporting agent specific authority regarding particular IRS forms. They can specify which forms the reporting Agent has the authority to sign and file. If the company wants to file its own Form 940, for example, they would not complete the section for Form 940 here. Part four gives the Reporting Agent the authority to make payments and deposits in relation to these forms. The company can authorize the Reporting Agent to handle all or some of its payments.
In the fifth and sixth parts of Form 8655, the company gives the IRS permission to give information to the reporting agent, including any IRS notices sent to the company. While this permission doesn’t have to be given, any reporting agent making deposits and filing tax forms does need to be kept in the loop on all important IRS communications.
Finally, the company can also authorize the reporting agent to sign and file certain local or state returns. Most companies do give the reporting agent this authority so that all the company’s tax forms are handled by the same entity.
Revoking reporting agent authorization
Once a company has filed a Form 8655 with the IRS, there are two ways to revoke authority to the reporting agent: file a new Form 8655 granting authority to a new agent, or send a formal notification letter to the IRS stating that the relationship is being terminated.
The reporting agent can also formally terminate the relationship by sending the IRS a written statement that includes the company’s name and address. Neither the company nor the reporting agent is obligated to notify the other party prior to contacting the IRS.
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