Common Tax Filing Errors and How to Handle Tax Notices

What is a tax notice?

Tax agencies, such as the IRS or state jurisdictions, use notices to communicate with employers about their business regarding unemployment, withholding, and other state-specific taxes. All tax notices will be sent to employers directly and will not ever be sent directly to us as the payroll provider. 

Below is a list of common tax filing errors that will result in an employer receiving a tax notice as well as common tax notice types and how to resolve them. 

If an employer receives a tax notice via mail or email, please share the notice with us via email for further review. 

Common Tax Filing Errors

Below  is a list of common tax filing errors that may result in either a rejected filing or tax notice being received by the employer:

1. Duplicate filing - Another tax return is already on file. This usually happens when a previous payroll provider files on behalf of the employer.
2. Invalid account number /Applied For - Have the employer review any correspondence they've received from the tax agency, log into their online account with the tax agency, or call the tax agency directly.
3. Invalid SSN - Update the employee's SSN.
4. Account closed - This happens when someone hasn't had payroll for several quarters. Call the tax agency and let them know you need to activate your account.
5. No access - The enrollment process has not been completed. Follow our provided directions to complete your enrollment.

How to Read a Tax Notice

1. Who sent the tax notice? At the top of the notice, there will be an agency name (i.e. IRS or Indiana Department of Revenue).

2. What is the notice filing period? The filing or notice period will identify the relevant quarter/month and year.  

a. If your first payroll check date within our system is after the notice period, we will assist in reviewing/handling the notice.

b. If your first payroll check date within our system is before the notice period, you will need to contact your previous payroll provider or the notice agency directly to assist with reviewing/handling the notice.

3. Does the employer data on the notice match your payroll settings? Please review the employer profile to confirm that all data shown on the notice matches what is currently within payroll settings. If any of the following information is missing or inaccurate in the payroll settings, this may have been what resulted in the tax notice being received:

• Business legal name
• Account ID/FEIN
• Tax rate(s)
• Business filing address
• Deposit schedule

Rate Change Notice

It is common to receive a notice from an unemployment tax agency with an updated rate for the upcoming tax year. Individual agencies determine the rate based on tax account history. If a rate change notice is received, please navigate to Employer Profile > Dashboard tab > Tax Info > Edit > Input the updated rate and effective date.

Sample notice:

Overpayment Notice

Below are a few reasons why a tax agency may send a notice of an overpayment on your account:

1. Duplicate payments/filing: You changed payroll providers and both the old and new providers submitted a payment/filing on your behalf. Duplicate filings can also be made if an employer and the current payroll provider both submit a payment/filing.

2. Penalties forgiven (abated): You may see an applied credit or overpayment if the agency removed a previously assessed penalty.

3. General adjustments: A credit may be applied if there are updates to wage or tax information.

4. General filing errors: If you change payroll providers in the middle of a tax period and inaccurate tax data is migrated to the new provider, filings may be underreported. As payrolls are processed, this would reflect an overpayment on the account.

Balance Due Notice

Below are a few reasons why a tax agency may send you a notice of a balance due on your account:

1. Missing Payment(s): Payment was not properly processed by the agency due to potential data mismatches (i.e. tax ID number error) or delays. Please see the Common Tax Filings Errors section above. 

2. Unauthorized payment: If a company has not provided necessary authorization to their payroll provider, it is possible that the payment was not processed (could also be a partial payment due in various cases, such as when switching payroll providers).

3. Late payment: A notice for late payment could be sent out if a payment is not received by the agency by the appropriate due date. This could result in penalties and interest being assessed as well.

4. Missing filing: If a filing is not received for a tax period, various agencies may issue a notice displaying an estimate of the wages and taxes due. In order to resolve this, the filing will first need to be completed in order to determine the balance that is due on the account.

5. General adjustments: If a correction is done to prior filings, there may be an additional amount due if there are changes in the total tax liability amount.

6. General filing errors: Over-reported amounts due to changing providers, incorrect identification numbers used, lack of employer providing authorization to payroll providers, or tax rate changes could all be potential reasons for a balance remaining on the account and penalties being assessed.

Missing Filing Notice

Below are a few reasons why a tax agency may send you a missing filing notice:

1. Data entry error: If incorrect tax identification information has been provided within your employer profile > tax info, filings and payments could be rejected.
2. Filing frequency/deposit schedule error: If the filing frequency that is configured in the respective agency account does not align with the requirements for the agency, a notice may be issued indicating a missing filing.
3. General filing errors: If an employer switched providers in the middle of a tax period and didn't provide sufficient authorization to either party, a filing might not have been accordingly sent and processed.

Informational Notice

Tax agencies send informational notices for a variety of reasons. Some may be to inform you of a rate change update, while others may confirm your payment was received.

Blank Filing Form/Filing Reminder Notice

It is common for an agency to send a reminder notice via mail or email when the current quarter is soon coming to an end. These notices do not need to be sent to us for review nor does any action need to be taken on the employer's end. These notices will often include a blank filing form as well. As your payroll provider, we will handle the upcoming payroll tax filings for you and already have any physical forms required.