It happens all the time - I literally just woke up to it again. A Press Release from the Department of Justice Tax Division:
So what happens when a payroll company steals the payroll tax dollars meant for the government? The employer still owes those payroll tax dollars to the IRS. The fact that it was stolen by a third party does not relieve the employer of the payroll tax liability.
True, we may be able to get penalty abatement due to the bad actor, but the taxes and interest will still be owed to the IRS.
This is why I recommend using one of the big national payroll tax companies. They are all publicly held behemoths that have more than enough resources to correct for anything that goes wrong and pay fines and penalties. If the small payroll tax company on the corner goes out of business, steals the money, or if the owner dies and no-one can find the payroll taxes you sent them, you are stuck. You could sue them, but how long will that take and how much money will it cost. Assuming you can even find someone to sue.
If you or someone you know has a payroll tax issue, feel free to contact me at egreen@gs-lawfirm.com or by phone at (203) 285-8545.
1 Audubon Street, 3rd Floor
New Haven, CT 06511
Ph. (203) 285-8545
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