On the hook for taxes when problems arise with payroll firms

04/25/2013 | Wall Street Journal, The

Research shows that 40% of small-business owners use outside firms to handle their payrolls, which can lead to trouble if these firms go bankrupt or commit fraud. For example, Kerry Koletar, who has used a payroll service for her family's Baltimore flower shop, recently found that her company might be on the hook for thousands of dollars of unpaid employment taxes. Nina Olson, who advocates on behalf of taxpayers at the IRS, has suggested that third-party payroll providers should have to post bonds to avoid these sorts of problems.

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