When a payroll company fails to pay taxes for its customer is the customer company responsible for payment?

Thank you for your question.  If you deposit your payments into the payroll company’s account to be paid by them then, yes, they are responsible for interest and penalties you will have to pay, but the IRS looks to you to pay the debt.  Pursuant to a recent policy update, the IRS says that the employer remains responsible for the taxes even if they outsource them to another company.  Thus, you will have to pay all of the payroll taxes, interest and penalties, but, if you put the money in their account to be paid to the IRS, then you can sue them for negligence to recover what you had to pay, including the taxes themselves because otherwise you would be paying double. To avoid this problem, an employer should (1) designate his address (not the payroll company) as the address of record so he gets any tax notices and can react right away; (2) make sure the payroll company uses EFTPS electronic processing so that payments can be confirmed online.