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Category: California Employment Law
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I switched payroll companies mid February. In March I

Customer Question

Hello, I switched payroll companies mid February. In March I received an email from the new payroll company stating that the had all necessary documents and will be taking over tax liabilities etc and that they will be filing the first quarter taxes for us. Two month later I received a letter from the EDD stating I owed 8k so I forwarded the letter to the payroll company they said " not to worry that it was an error and many people received letter"
Now I received another letter stating I owe 9k and 1100 on penalties. I send them the letter and they replied that those taxes where for February and the old payroll company should have taken care of. I called EDD and they said this was for the first quarter taxes.
Should my new company be liable for at least the penalties? everyone is washing their hands when in fact that is what they get paid so I don't have to deal with taxes
Submitted: 1 year ago.
Category: California Employment Law
Expert:  EmplmntLaw1 replied 1 year ago.

Ultimately the liability is yours to the EDD. In other words it is not a legal defense to the EDD that you hired out the payroll to another company. That being said, you have potential breach of contract and/or negligence claims against both payroll companies. The first company should have transferred the funds to the second. The second company should have actually paid the tax. So you need to really for lack of better term, threaten with litigation for the penalty amount. Clearly the taxes weren't due until after February, so the second payroll company was "on watch" at that point they should have ensured there were adequate funds and paid the tax. Now, where the $9k is I have no idea, probably both companies are holding part of that. But the penalty it seems should be on the second company for not timely paying or realizing there were inadequate funds long before now.