Did you receive a payroll tax notice from the IRS or a state tax agency? No need to panic! These notices are common, and resolving them can be simple. This article will walk you through how to handle a payroll tax notice.
What is a Payroll Tax Notice?
A payroll tax notice is a letter from the IRS or your state’s tax agency, letting you know there’s an issue with your payroll taxes. This could be anything from an underpayment to filing errors.
Here are the most common types of payroll tax notices:
💲 Balance Due: You owe more payroll taxes than expected.
💴 Credit Balance: You have overpaid payroll taxes and have a credit on file.
🕦 Late Deposit: You missed the deadline for depositing payroll taxes and might face penalties.
⚠️ Filing Errors: There’s an error in your filed tax forms like the 941 (Quarterly Federal Tax Return) or state filings.
❗Employee Information Mismatch: The Social Security Numbers (SSNs) on file don’t match what was reported for some employees.
⭐First Things First: Understand the Payroll Tax Notice
Read the Notice Carefully: Look for the issue, the payroll period it refers to, and any deadlines for responding or paying.
Log into GoCo: Head to your GoCo account and pull up the payroll reports for the period in question. Check out this Guide on Payroll Tax Documents. Compare this information with what the tax agency portal says to locate any differences.
Double-Check for Common Payroll Errors: Make sure everything looks good—wage reports, SSNs, and withholding amounts. It’s always a good idea to catch any mistakes now before they lead to bigger problems!
✅ How to Resolve the Issue
Depending on what the notice says, here’s how you can resolve it:
If You Agree with the Notice: |
If You Disagree with the Notice: |
| Pay the Balance Due: If the notice says you owe more taxes, follow the instructions to pay the balance directly to the taxing agency. | Respond to the notice: If you disagree with the notice, you can respond through the tax agency portal or via details on the notice to let the agency know you disagree. Provide any supporting details to support your findings. |
| Late Deposits: If the notice says you missed a payroll tax deposit, go ahead and pay the penalty. If you believe GoCo Embedded Payroll made this timely payment on your behalf, please pay the balance and penalty, then reach out to GoCo Support to confirm. | Contact your CPA/ Accountant: It is always best to consult your CPA or Accountant if you have questions related to payments that have been debited from your company. |
| Filing Errors: Mistakes happen! GoCo makes it easy to file corrections, such as amending Form 941 (Quarterly Tax Return) or state payroll filings. Just reach out to GoCo support and we can process your correction. | Reach out to GoCo Support: For complicated notices or if you need additional support, reach out to GoCo Support. |
❗What NOT to do
Do not ignore your payroll tax notice or delay response. Failing to respond to a payroll tax notice can lead to a range of consequences, depending on the severity and duration of the non-response.
Potential consequences for failure to answer a payroll tax notice:
Penalties and Interest: You may be subject to penalties for late filing or failure to file, as well as interest on any unpaid taxes. The IRS and state tax agencies impose fines that accumulate the longer the notice is ignored.
Wage Garnishment or Asset Seizure: Tax authorities can take aggressive action to collect unpaid taxes, such as garnishing wages, placing liens on assets, or seizing bank accounts if a business continues to ignore notices.
Increased Debt: Ignoring a tax notice could lead to the original tax amount ballooning due to added penalties, interest, and collection fees, making it much harder to pay off over time.
Audit or Investigation: Continued non-response could trigger an audit or deeper investigation into the company’s tax filings, exposing additional issues that could lead to further legal and financial trouble.
Loss of Business Licenses: In some states, failing to respond to payroll tax issues could result in the suspension or revocation of business licenses or certifications.
Damage to Credit Rating: A tax lien on a business can damage its credit score, making it more difficult to secure financing or enter into agreements with vendors or clients.
Legal Consequences: Prolonged non-compliance can lead to legal action, including lawsuits or criminal charges in extreme cases of tax evasion or fraud.
For any additional questions, we’re happy to help! Reach out to us at help@goco.io. 💚
Disclaimer:
This article is not to be taken as tax, legal, benefits, financial, or HR advice. Since rules and regulations change over time and can vary by location, consult a lawyer or HR expert for specific guidance.