Legal Question in Tax Law in California

Payroll Liabilities/late filing penalty

Hello,

I switched payroll providers in mid August 2005. The previous payroll provider (big name company) had payroll withholdings that they did not pay--they refunded them to me one day before they were due (Sept. 14). I had no way to pay the money electronically since my credit union does not handle 941 tax filings, and the EFTPS system takes about two weeks to enroll. The associate at the former company suggested I try paying them through a big name bank, but after calling three of them, none would take the tax deposit since I did not have an account with them.

I mailed a paper check to the IRS and FTB. IRS assessed a 10% late penalty--about $850! I also received two smaller penalties from California.

Can I take the former payroll provider to small claims court? Their initial response is, ''No, we won't pay this,'' but I'm trying again, a little more forcefully. My contention is that they should have either paid the money directly to the government, or refunded it to me much sooner.

If I can take them to court, can I also recover the cost of my new payroll provider's time to do the legwork? What about my new payroll provider's responsibility here--should this company pay any of the penalty?

Thank you.

JT


Asked on 12/13/05, 1:48 am

1 Answer from Attorneys
Carl Starrett Law Offices of Carl H. Starrett II

Re: Payroll Liabilities/late filing penalty

It sounds to me like there is plenty of blame to go around, but liability is going to be based on what your contract say. IT seems to me there was a lack of coordination between the old and new payroll company. I would think that your new payroll company should have gotten into this issue early on so they could advise you during this transition. Also, why did your new payroll company help you out?

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Answered on 12/13/05, 2:38 am


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