An e-mail confirmation process to notify employers of account activity by third-party payroll processors, such as scheduling or canceling payments, is to start this month, according to Thomas Mathews, director of headquarters collection of the Internal Revenue Service's Small Business/Self Employed Division. "The e-mail service gives employers another tool to monitor actions to make sure the third-party payer is doing what it is supposed to do," Mathews said. 

The email notification system, as well as an address notification program implemented in January 2014 so that employers could approve and confirm changes made by payroll processors, is part of the agency's efforts to increase employer safeguards related to payroll service providers. 

The Treasury Inspector General had earlier noted that 40 percent of small businesses rely on outside payroll processors, and it questioned whether the IRS had adequate controls to safeguard employers when third parties do not comply with payment and filing rules. "While third-party payer arrangements usually work as intended, there have been instances in which third-party payers receive funds from employers for payment of payroll taxes, but they have not remitted those taxes to the IRS," according to TIGTA. "This causes significant problems for employers because the funds have been paid out but the taxes are still due."