How To Handle Your Payroll Tax Notice
What is a Tax Notice?
You received a tax notice (also known as an assessment) in the mail either from the IRS or a state tax agency. Tax notices can be purely informational or may require action to be taken. It is a way for tax agencies to communicate your account status, new filing frequency, or rate assignments for your company. Most notices can be resolved on your own by verifying the information on the notice against the information in your online Square Payroll Dashboard. Commonly received tax notices include:
Federal Tax Notices:
Annual or quarterly filer assignments
Missing filings or payments
Credit balance or tax due
State Tax Notices:
Filing frequency changes
State unemployment rate assignments
Missing filings or payments
Credit balance or tax due
Initial Steps for all Notices
We recommend following these steps first to understand the tax notice you received:
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Identify the agency: IRS or a state agency
Confirm that the state agency handles payroll taxes and is supported by Square Payroll. See Square Payroll's supported tax payments and filings page in our Support Center.
If the tax notice is not related to payroll or is from an unsupported tax agency, please contact your accountant or CPA to handle the notice. For example, if it is a sale tax notice, this is not handled by Square Payroll.
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Identify the tax period:
Taxes are reported based on the pay date, and not the pay period. Please confirm that your payroll was processed through Square for the tax period reported on the notice. You can confirm your first pay date through Square Payroll by going to the History & Reports tab of your online Square Payroll dashboard.
If your first pay date with Square Payroll lies within the tax period, proceed to the next step. If the tax period is prior to your first pay date with Square Payroll or after your final pay date with Square Payroll, please reach out to your previous or subsequent payroll provider for additional assistance.
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Verify your taxpayer information from the notice matches what is shown in your Square account:
Account number
Taxpayer name
Filing or deposit frequency (applies for both the federal and state level)
You can view your taxpayer information in the Business Info and Tax Info sections of your Square Dashboard. If the information on your Square Payroll account has not been updated, please update your account as soon as possible.
If your account number was previously incorrect on Square Payroll and has since been updated, contact the state agency directly to get the filing and payment(s), if applicable, moved to your correct account. Agency contact information can typically be found on the notice. If you need additional assistance moving filings or payments, please contact support.
Next Steps for IRS Notices
Once you have reviewed the notice and verified the information above is accurate, please see below for guidance on commonly received notice types from the IRS.
Note: You can search for more information on how to handle your IRS notice by visiting Understanding Your IRS Notice or Letter.
Filing frequency change
Your company is assigned as either a quarterly or yearly filer by the IRS. Once you receive your filing frequency, you can update it by logging in to your online Square Dashboard and going to Staff & payroll > Payroll > Settings > Tax Info.
Balance due
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If you switched from your previous provider to Square Payroll mid-year:
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Check your email associated with your Square Payroll account. Search for email with the subject line Outstanding Taxes Due. If the total balance on the notice matches the total taxes listed on the email, please either:
Contact your previous payroll provider to remit the full payment, or
Remit payment by following the instructions on the notice
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Contact the state agency directly for information if you are unsure why this balance exists. Contact information should be stated on the notice.
If you still have questions, send us the notice for review.
Failed withdrawal
Check your email associated with your Square Payroll account and search for an email with subject line Failed Withdrawal. If the total federal taxes on the email matches the balance on the notice, remit payment directly via EFTPS. Please see our Support Center for more information on how to make federal tax payments.
Switched from your previous provider to Square Payroll mid-year
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Check your email associated with your Square Payroll account and search for email with subject line Outstanding Taxes Due. If the total balance on the notice matches the total taxes on the email, please either:
Contact your previous payroll provider to remit the full payment, or
Remit payment directly via EFTPS. See our Support Center for more information on how to make federal tax payments.
It is in your best interest to pay these outstanding payments as soon as possible to keep your account up to date and to avoid receiving additional IRS notices.
If none of the above applies to you, please contact support with your notice for additional guidance.
Credit balance
Contact the IRS directly for information if you are unsure why this credit exists.
If you still have questions, send us the notice for review.
IRS refund check
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If you are unsure why you received a refund check, do not immediately cash it. Contact the IRS at 800-829-4933 directly for more information. If you are still unsure why you received this refund check, please contact support to verify the validity of the check.
Note: If a refund check is sent to you in error and the check is deposited, the original payment date will no longer be valid and penalties and interest will accrue.
Next Steps for State Notices
Once you have reviewed the notice and verified the information in the initial steps is accurate, please see below for guidance on common notice types from state agencies.
Filing frequency change
Your business will be assigned a filing/deposit frequency every year by your state agency. Please contact support with your notice and we will help you update your filing frequency.
Unemployment insurance rate update
State agencies will assign your business an unemployment insurance tax rate every year. Most states send out rate notices in December. Your assigned rate is determined by various factors that differ from state to state. Please update the rate in the Tax Info section of your online Square Payroll dashboard. When updating, you can choose to have your new rate take effect for the current quarter or to take effect at a future date.
Credit balance
Contact the state agency directly for information if you are unsure why this credit exists. Contact information should be stated on the notice.
Balance due
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If you switched from your previous provider to Square Payroll mid-year:
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Check your email associated with your Square Payroll account. Search for email with subject line Outstanding Taxes Due. If the total balance on the notice matches the total taxes listed on the email, please either:
Contact your previous payroll provider to remit the full payment, or
Remit payment by following the instructions on the notice
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Contact the state agency directly for information if you are unsure why this balance exists. Contact information should be stated on the notice.
If you still have questions, send us the notice for review.