Many small business or practice owners with employees decide to outsource payroll and related tax duties to third party payroll service providers. This helps employers meet filing deadlines and deposit requirements and streamline business operations. Some of the services provided include administering payroll and employment taxes on behalf of the employer. The service provider also reports, collects, and deposits employment taxes with state and federal authorities. This can be a very effective way to deal with paperwork and time required however, you should keep in mind that you are always responsible for the deposit and payment of federal tax liabilities. If the third-party fails to make the federal tax payments, the IRS may assess penalties and interest on your account. The employer is liable for all taxes, penalties, and interest due and may also be held personally liable for certain unpaid federal taxes. So, its always important that you understand what the requirements are and keep track of what is taking place.