Why does your payroll company keep messing up your taxes?
- Claire Baker
- Dec 25, 2025
- 2 min read
Has this ever happened to you?
You get a notice from the state. Ready for blood, you submit it to the payroll company.
And a few weeks later they just... fix it.
No explanation. Just, “All better now.”
Here are five examples of mundane breakdowns that I’ve seen lead to payroll errors:
1️⃣ They submitted it on paper or by fax.
Every once in a while, a filing needs to be submitted outside the normal flow. When that happens, the payment may be submitted through one system and the matching report comes in through a different system.
If the payment arrives first, they don’t know what filing to apply it to, so they enter a credit.
When the filing comes through a few days later with no payment attached, they mark it as unpaid.
Someone has to actually call in and tell them to apply the credit against the balance. Stupid. I know. But that’s bureaucracy for you.
2️⃣ Someone forgot to close the account.
The payroll company doesn’t just close your account as soon as you stop paying someone in that state. You need to tell them “nope, no payroll this time either” until someone either goes out of their way to close the account or checks a box on a form at the end of the year.
Eventually the accounts get closed due to inactivity, but if you stop “filing zeros” before that happens, the state may think you’re hiding something. So they send you nastygrams with scary inflated fines to get your attention.
All the payroll company has to do is submit $0 filings for the missing reporting periods and close the account.
3️⃣ You clicked the wrong box.
There are a lot of confusing tax settings in your payroll dashboard. You may have accidentally clicked the wrong one thinking it meant something else, and now the state is expecting a payment or report that doesn’t apply to you. Or the payroll company is filing things that it shouldn’t.
Someone (either you or the payroll company) needs to call the state and clear up the mistake.
4️⃣ You didn’t grant the right permissions.
After setting up an account or changing third party administrators, you need to authorize them with the state.
The process is confusing, riddled with the kind of “security” that just gets in the way, and comes after many people think they’re finished. But until you complete this step, the payroll company can’t manage your taxes no matter how much you yell at them.
5️⃣ The state doesn’t have its act together.
State tax agencies are exceptionally siloed and the left hand doesn’t always know what the right hand is doing. Sometimes the only reason you got a letter was because one department worked more quickly than another.
6️⃣ The payroll company doesn’t have its act together.
Accidents happen. Sometimes people are poorly trained and don’t recognize errors. Your letter gives them a chance to fix it.
👋 I’m Claire. I find this process just as frustrating as you do, but I’ve seen enough breakdowns to get to the bottom of it quickly, so I have more of an appetite for frustration.
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