Can you afford to pay your payroll taxes twice?

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It's hard enough to run a business without becoming a payroll tax expert, too.  That's why many people farm out their payroll function to a payroll service.  They almost all do a good job, but woe unto a business when a payroll service goes bad.

Customers of New York payroll service Paybooks Inc. lived the nightmare.  The owner of the payroll service allegedly spent $2 million of funds provided by his customers to pay their payroll taxes.  The IRS and state taxing authorities didn't have much sympathy.

Carpet store owner William Calder is typical of the Paybooks, Inc clients:

...he contacted taxing authorities on his own. Also like the others, he is upset about having to pay the full amount his business owes despite Paybooks having taken $66,000 from the store's account. After some negotiation, the IRS agreed to waive penalties but still charge interest for late payment of his federal taxes, Calder said.

After some negotiation, the IRS agreed to waive penalties but still charge interest for late payment of his federal taxes, Calder said. He rattled off a list of eight other small-business owners being similarly squeezed, including his personal attorney, who Calder said owes $18,000.

Fortunately, you can check up on your payroll service.  Businesses that enroll in EFTPS, the federal Electronic Payroll Tax Filing System, can go online to make sure their payroll taxes are being credited to their accounts. 

Whether you outsource your payroll or take care of it in-house, it never hurts to make sure your payroll accounts are in order.  Nobody wants to pay their payroll taxes to a thief and to the IRS.  It's enough fun to pay them once.