How to verify payroll tax deposits made by your provider

A payroll provider's debit proves money left the company's bank account. To verify a tax deposit, you also need evidence that the intended authority received the payment for the correct account and period. Build a review that follows the payroll liability through those separate records instead of closing the task when the funding debit clears.

The IRS warns that employers generally remain responsible for employment tax obligations when payroll work is outsourced. Publication 15 describes different third-party arrangements and a specific exception for certified professional employer organizations. Establish which arrangement your company actually has before applying a general statement about liability to your contract.

Ask the provider for a schedule of the federal, state, and local accounts it services, the returns it files, and the deposits it makes. Mark obligations outside its scope. Include the first effective period and any prior-period responsibility retained by a former provider or the company. A payroll subscription name is not a complete filing list.

Compare that schedule with employee work locations and the company's existing registrations. When a new account or rate notice arrives, identify who enters it and who checks the first affected payroll. Keep the provider's account references linked to the internal compliance register so a later notice can be assigned without searching several customer support histories.

The IRS recommends that employers use EFTPS access to monitor federal deposits made on their behalf. Publication 15 describes the Inquiry PIN supplied when a third party enrolls an employer and says it should be activated and used for monitoring. Follow the official access process and keep credentials under the company's control.

For the relevant federal deposits, compare the tax-payment history with the provider's report. Verify the tax, period, amount, and date, and retain the evidence used for the review. Ask the provider to explain any unavailable or unmatched item. For state and local accounts, establish the corresponding verification method with the responsible agency and adviser rather than assuming EFTPS covers them.

Use the payroll register to establish the liabilities for the run. Then trace the amount collected by the provider, the amounts deposited with each authority, and the figures reported on the relevant return. Preserve adjustments, reversals, and off-cycle payrolls as separate entries so their effect can be followed without replacing the original report.

Some differences reflect timing or how the provider groups payments. Ask for the reconciliation before classifying a difference as a missing deposit. A useful explanation names the affected payroll, payment reference, and period; a comment saying the balance will clear next quarter leaves the reviewer unable to test that explanation.

Set an owner and a next check date for unresolved amounts. The quarterly return review should revisit the open list, but an unexplained missed deposit needs attention when discovered. Discuss applicable deposit deadlines with the provider and tax adviser so the review happens while a correction can still be addressed promptly.

The IRS strongly recommends maintaining the employer's own address of record, because routing correspondence only to the provider can reduce the company's visibility into tax problems. Assign someone to open and route tax mail even when the payroll provider handles the underlying work.

If a notice reports an unpaid amount, preserve the full notice and compare it with the payment evidence. Send it to the provider and the company's tax adviser through the approved channel, with the response date visible. Ask who will contact the agency, what authorization is needed, and what the company should do while the discrepancy is investigated.

Record the provider's explanation, the agency communication, and any correction or payment. Check the account again after the proposed resolution and reconcile any remaining interest, penalty, or credit with the adviser. A support ticket marked closed does not explain the tax account's final position to the next reviewer.

During a provider change, carry outstanding deposits and notices into the transition schedule. Name who owns each historical period and verify that the new provider does not duplicate a payment already in progress. Keep the reviewed register, deposit evidence, filed returns, and unresolved-item list available to the company after the outgoing provider's portal access ends.