Can the payroll company be held liable for neglecting to add important information, such as federal taxes withheld, on paychecks?

The payroll company that my job works with does not list filing statuses on the paycheck stubs, nor does it list a column for tax deductions if there was no tax paid. Because of the lack of information on the paycheck stub, I had no idea that no federal tax was withheld from my paychecks for the entire year and now I will be penalized. If my paycheck would have stated that there was 99 exemptions on it, then it would have been noticed and this problem would have never happened. Is there anything I can do in this case?

Asked on February 9, 2016 under Employment Labor Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

Yes, you can sue the payroll company for your losses--not the taxes, which you would have paid anyway, but the fines, penalties, interest, etc. which you would not have paid but for their error. They would be liable under a negligence (unreasonable carelessness) theory: it is negligent to not list the informaton so people can check it; it is negligent to not put in the correct exemptions (I rather doubt you requested 99); and it is negligent to put in an unreasonable number of exemptions (99? Really? What, your family is the Duggers x 5, so you have 90 dependents?) without confirming it.

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