(US) Payroll tax notices

When it comes to payroll tax payments and potential fees, you want to get to the heart of the issue as soon as possible. It’s likely that you missed a simple step when getting started with Wagepoint, so we've compiled a list of all the common questions so you can troubleshoot your payroll tax notice. 

Is your tax ID valid and accurate?

After registration, most state agencies will provide you with a valid tax ID to pay withholding or unemployment taxes.  These tax IDs are specifically assigned to your company for every state your employees work in — if you have multiple locations in different states, you will see each of those ID numbers and withholding amounts listed in the Tax tab in Wagepoint.

• Make sure these ID numbers match the account numbers given to you by your state tax agency.

Is your tax ID status in Wagepoint set to “Applied For”?

As stated above, state tax agencies will provide you with a valid tax ID after registering, but most will allow you to list “Applied For” in place of your state tax ID while you are in the registration process. 

Other states such as  CA, CO, DC, FL, IL, IN, LA, MA, MD, MN, NE, NY, TX or WI do not accept “Applied For” as the state tax ID, and we will not be able to send any payments or file any compliance forms until you receive and enter your correct ID after registering. That being said, this may generate late fees from the state for non-filing if you try to run payroll before completing registration.

• You may only list “Applied For” during registration and must update the Tax tab with the correct ID number as soon as you receive it.

Have you selected the correct IRS tax remittance schedules?

After registering with the IRS, they will also provide you with your filing frequencies (remittance schedules). This is how often you need to make payments to the IRS based on your total tax liability amount. Learn more about federal deposits.

If your tax liability amount increases or decreases during the year, the IRS may also change your frequency to a higher frequency (i.e. from quarterly to monthly) or lower frequency (i.e. from monthly to quarterly). You will be notified via a letter if this happens, usually at the beginning of the year.

State remittance schedules can vary from your federal schedule. Changes to your state remittance schedule usually occur at the beginning of the quarter, and you will be notified via letter for this as well.

• Make sure to go into the Wagepoint app to the Tax tab to update your remittance schedules if a change occurs, otherwise, you will receive a notice since the payments would be considered late or incorrect.  

Are your state unemployment and federal unemployment rates correct?

Each state has its own unemployment tax rate that applies to your business. In our application, the state UI rate defaults to .054 (5.40%) and .006 (0.6%) for federal unemployment. 

• Before using the default rates in the Tax tab, check with your state’s tax agency to ensure you don’t fall into a different rate category. If you have multiple locations in different states, you will need to check the rates for each state.
• There is also a new employer rate for new businesses. The length of time that new employers are subject to this rate also varies. Contact your state unemployment office for information on new employer rates.  

Were you processing payroll with Wagepoint during the dates referenced in the notice?

Sometimes notices are generated for a period that you were not processing payroll with Wagepoint. This may be caused by a prior payroll service or accountant, or you may have entered the incorrect pay period upon registering with the IRS.

• If you are using Wagepoint after accruing fees from the IRS for previous periods, you are still liable as an employer for those penalties. 

Per our Terms of Use, Wagepoint is not responsible for rectifying any tax issues that may have occurred before you became a customer. 

• If you had a different payroll provider or accountant during the time of fee accrual, contact them to see if they can help with the next steps.
  

Did you enter prior payroll and mid-quarter data accurately and completely?

If prior payroll information is missing from Wagepoint before you start processing payroll in the app, the data will not show correctly on compliance forms.  This will generate a notice, either for a credit or an amount due for a penalty. You can also accrue a penalty from Wagepoint for incorrect information prior to your first payroll in the app.

If you don’t enter year-to-date information before processing payroll with Wagepoint, you have two options to rectify the amounts:

1. Under- or over-withhold amounts (depending on the mistake) for the next pay periods before year-end and filing the corresponding "X" correction forms.
2. Allow Wagepoint to make corrections and file the forms on your behalf. If you choose Wagepoint to correct YTD information for you, fees apply for each employee that needs correcting. Learn more about entering quarter-to-date and year-to-date information

Why did you receive a notice from the Social Security Administration (SSA)?

If you receive a payroll tax notice from the Social Security Administration (SSA), there are two common reasons this could occur:

• Your year-end forms (941s) did not match the totals on your employees’ W2s and W3s. 
  • If the error was made on form 941, you must submit the form 941-X correction form to amend the original document. 
  • If the error was made on a W2 or W3, you have to submit a W2-C or W3-C correction form to amend the original document.
• Employee Social Security Numbers (SSNs) are incorrect. 
  • If the SSN is incorrect in the Wagepoint app only, it can be fixed in that employee’s detail tab. 
  • If the SSN is incorrect on the employee’s W2 as well, you will need to file a W2-C to make the correction.
  • If the employee’s SSN was incorrect during a payroll run, it’s likely that there will be mistakes when trying to attribute certain tax payments to them. 
  • Contact support for more information about what you need to do.

Third-Party Authorizations

Have you assigned the right Third Party Authorization (TPA) for your payroll?

Some states require you to list Wagepoint as a Third Party authorized to access your tax data and make payments on behalf of your business. If your state requires a Third Party Authorization (TPA), instructions will appear in the “Tax Notes” section under your company’s Tax tab.

There are eight (8) agencies that require a TPA: DC unemployment insurance (UI), MA withholding (WH), MA UI, MN UI, NM UI, NV UI, OH WH and PA UI.

• If you don’t authorize Wagepoint with these agencies, we and our TPA tax agent cannot make payments or file your tax forms, and you, as the employer, will be responsible for taking care of it yourself.

When the payment was received, was it posted to the correct account and/or period?

Even if you made your payment on time, sometimes tax agencies can accidentally post the check or credit to the incorrect tax ID or period.  

• You will need to call the tax agency and provide them with the cancelled check (for physical payments) or tracer number (for electronic payments) to prove your payment was made for the correct amount and period.

What is your responsibility as an Employer?

If you’re using Wagepoint, you’re classifying us as a third-party to file and remit your employment taxes. However, the employer is still liable for all tax payments and filings, which means that you are responsible for any penalties even if we file or remit the taxes late or incorrectly due to not having the correct information.

As a Wagepoint user, you will receive notifications about deadlines and responsibilities throughout the tax year to prevent any problems with your filing. But, a failure to provide necessary information can result in penalties, for which you be responsible as the employer.

On that note –

The payroll tax notice should tell you the next steps you need to take for rectifying your account. Usually, it involves making an additional payment to avoid further fees.

If you have a reasonable cause for not paying payroll taxes, the penalties will not apply. In this case, you can provide an explanation of why you believe you have a reasonable cause —  Wagepoint can provide an abatement letter template to help you do this.

The IRS and state agencies might waive penalties if you unwittingly fail to deposit for the very first quarter employment taxes are due for your business. The IRS might also waive penalties for the first quarter when your frequency of deposits changes.

If you purposefully fail to pay your payroll taxes, your penalties will not be waived.

Don’t plan to rely on waivers from the IRS. As you would any other employment expense, you should budget for payroll taxes before you decide to hire someone.

To find out more about payroll taxes and their requirements, refer to this post on our blog.