Payroll tax problems can build quietly while everything appears to be running smoothly. Your employees receive their paychecks, money leaves your business account, and you assume the rest is being taken care of. In this episode, you’ll learn what happened when one business owner discovered years later that payroll taxes and required filings hadn’t been handled correctly, and what you can do to check your own payroll process.
How a payroll problem went unnoticed
A longtime client left their payroll provider in 2020 for an option that would save about $10 per month. The owner had a reasonable goal: reduce business expenses. But the real cost of the decision didn’t become clear until the end of 2025, when the client discovered that payroll taxes hadn’t been paid properly and required reports hadn’t been filed.
Some payments had been made, but the owner didn’t have the documentation to confirm whether the full amounts were paid or whether payments were made on time. The balance, including penalties and interest, grew to more than $85,000.
The client returned for help. The team reviewed federal and state accounts, traced payments, and worked to file prior returns. The client is now receiving payroll processing again, while an attorney seeks to have some penalties and interest abated. The IRS has not yet finished processing everything submitted.
“When it comes to payroll, ignorance can get expensive.”
What to ask before you hand off payroll
“Can you do payroll?” is only a starting point. Ask what the person or company will handle after each paycheck is processed. Find out whether they calculate payroll taxes, make tax deposits, file required federal and state returns, handle unemployment filings, and prepare W-2s.
You should also ask what happens if a payment or filing is missed, or if a tax agency sends you a notice. Payroll requirements can depend on where your employees work and the type of business you operate, so ask whether the provider has experience with businesses like yours.
Keep access to your payroll records
You don’t need to prepare every payroll return yourself, but you should be able to review payroll reports, see evidence of tax payments, and get copies of required filings. Those records help you verify the work and spot possible issues.
If you receive a notice from the IRS or a state tax agency, don’t assume it has already been handled. Find out what it concerns and follow up until you know the issue is resolved.
Look beyond the monthly fee
Choosing a lower-cost option isn’t automatically a bad decision. The important thing is to understand the expertise and services you’re getting. A low monthly price may not be a savings if you later need to address missed payments, filings, penalties, interest, and professional fees.
Payroll tax problems are easier to address when you know who is responsible for each step and can confirm the work is being done. You don’t have to become a payroll expert. You do need a clear understanding of what your provider handles and access to the records that show it.
Watch the full episode
Watch the full episode to hear Candy Messer explain this client’s experience and share practical questions you can ask before trusting someone with your payroll.
