My employer's payroll company did not withdraw the correct percentage of state taxes from my year's worth of paychecks. I'm now liable for $2,000 in state taxes. Can the payroll company be held fully or partially liable for this amount?

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    The question I'm linking as a potential duplicate may look different, but the answer is effectively the same. In short, you would need to pay that tax either way, its now you "got" to delay paying it until the end of the year. It does not seem possible to hold anyone else responsible for paying that tax, but if you pay penalties / interest to the IRS, you maaaaaaay be able to fight for that to be covered. Commented Mar 17, 2020 at 18:43

1 Answer 1


No, a payroll company isn't liable for paying tax you owe. They calculate how much should be withheld from each paycheck and direct your employer to pay it to the tax authority.

The amount withheld isn't always a perfect match to your tax liability because, because you may have other income -- like from other companies, interest income, or stock sales.

Withholding is controlled by the W-4 at the federal level, and similar form at the state level. Review your elections on the W-4 form to make sure they reflect your family tax situation.

In the highly unlikely situation that the payroll processor made a mistake, and that resulted in you owing underpayment penalties, you might have some luck in getting them to pay the penalties. But I doubt you are in that situation. And regardless, you are personally responsible for your own tax bill.

  • I understand I'm responsible for paying my own taxes; however, my company's payroll department, or in this case, payroll company, should be held responsible for deducting the correct percentage of taxes based on the state I live in.
    – Julie D
    Commented Mar 19, 2020 at 15:32

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