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Your Accountant Made an Error with Your Payroll Taxes: Will You Get in Trouble?

Posted by Juda Gabaie | May 18, 2022 | 0 Comments

Nobody likes doing taxes. When you have a business to run, you have other things to worry about—plus, you'd rather hire a professional to take care of complex payroll taxes. But what happens if the accountant or payroll service you hired makes a mistake on your tax return? The IRS has started cracking down on employers with outstanding tax liabilities, so you could end up in a bad situation.

You Are Liable for Tax Return Mistakes

Although you hired an accountant to do your taxes, it's your tax return with your name on it. It's your responsibility. If there's an error, it's on you, not your accountant. If the IRS adjusts your tax liability and determines that you owe more money, you have to pay it, not your accountant. You're also on the hook for any penalties and interest.

What to Do If Your Bookkeeper Makes an Error on Your Return

If you or your accountant notices a payroll tax error, you should work together to fix the mistake as soon as possible. The accountant should offer to file an amended return for you at no extra charge if the mistake was on their end. The relevant form is 941-X, the Adjusted Employer's Quarterly Federal Tax Return. You can file a 941-X to notify the IRS of any over or underreporting of your payroll taxes and start the adjustment process.

As of 2022, the IRS is taking a harsher stance against employers who do not remit a 941-X for mistakes on their tax returns. Those with outstanding liabilities will have to answer to one of the IRS's revenue officers to remedy the situation. It's possible the revenue officer will also refer you to the criminal investigation division if they determine a crime has been committed.

You have a lot to lose if you discover and do not attempt to rectify mistakes with your payroll taxes. Any past issues can come back to haunt you, as the IRS has three years to assess tax liability against an officer of the business and ten years before the liability even expires.

Proving Negligence

Many companies use payroll services to handle their employment taxes, rather than a single accountant. If you notice a discrepancy from this service, they could be held accountable, not you. The payroll service may have been withholding taxes but failing to forward them to the IRS appropriately.

If you want to claim negligence on the part of your accountant or payroll service for errors with your payroll taxes, you will have to demonstrate:

  1. The accountant had a legal duty of care to you.
  2. The accountant breached that duty.
  3. The breach caused harm to you.
  4. The accountant's negligence resulted in damages to you.

Work With an Experienced Maryland Tax Attorney

When you run a business, you want to stay out of trouble with the IRS. You could face strict and drawn-out consequences on both your business and personal finances if you don't. If you find yourself with an erroneous tax return, working with an experienced tax attorney could help you save time and money. For more information about how Gabaie & Associates, LLC can assist you, call us at (410) 358-1300 today.

About the Author

Juda Gabaie

Juda Gabaie Esq. has dedicated his career in defending clients nationwide to resolve tax disputes before the Internal Revenue Service and the state taxing agencies. Juda has represented clients before the US Tax Court, Maryland Tax Court, and Comptroller of MD hearing compliance. As an adjunct prof...


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