How can a small business owner check that the payroll taxes withheld from employees' pay were actually deposited with the IRS by their payroll service provider or bookkeeper, and what happens if they weren't?

What should I check, step by step?

1. Enroll on EFTPS under your business's EIN and get your own PIN (EFTPS.gov or 800-555-4477). The Taxpayer Advocate Service says EFTPS automatically issues Inquiry PINs to clients of payroll service providers; if you never got that letter, register yourself.

2. After each payroll, check that a federal tax deposit appears in EFTPS for the right amount and on time. The first missed or late deposit is the IRS's red flag, not something to wait out.
3. Each quarter, compare the tax on the Form 941 that was filed (a copy from the provider, and the transcript in your IRS Business Tax Account if you can register) with the withheld income tax and Social Security and Medicare shown in your own payroll register. A return that reports less than you were charged is a warning sign even if every deposit matches the return.
4. Confirm your IRS address of record is your own business address. You can check it with the IRS Business and Specialty Tax Line at 800-829-4933. If it was changed without your authorization, tell the IRS straight away.
5. Open every IRS notice yourself. A late-payment notice explained away as the IRS being slow or misapplying a payment is exactly what clients in a 2026 sentencing case were told.
6. If the person running payroll is an employee rather than a provider, apply the same check: someone other than them looks at EFTPS and the 941 transcript.
7. Keep your own dated record of what was due and what you saw deposited each period, outside the payroll system, so a gap is visible without asking the person who made it.
8. If you find unpaid deposits, contact the IRS quickly using the number on the notice or 800-829-4933, and talk to a tax professional before paying anything twice.

Is a small business still liable if its payroll provider doesn't pay the payroll taxes to the IRS?

The IRS's Outsourcing payroll duties page (reviewed March 4, 2026) says the employer is ultimately responsible for the deposit and payment of federal tax liabilities, even when it forwards the tax amounts to a third party; if the third party fails to pay, the IRS may assess penalties and interest on the employer's account, the employer is liable for all taxes, penalties and interest due, and it may also be held personally liable for certain unpaid federal taxes. The page also notes there have been prosecutions of people who, posing as payroll service providers, stole funds meant for employment taxes.

• The Internal Revenue Manual says the same in its section on third-party payer arrangements: a payroll service provider is not liable for the employer's employment taxes, and using one does not relieve the employer of its obligations. The Taxpayer Advocate Service adds that when a provider goes out of business or misuses client funds, the employers may end up paying the tax twice: once to the provider and again to the IRS with interest and penalties.
• Withheld income tax and the employee share of Social Security and Medicare are trust fund taxes. Under the Trust Fund Recovery Penalty, the IRS can assess the unpaid amount personally against any responsible person who willfully fails to collect or pay them, and its TFRP page (updated October 11, 2026) lists payroll service providers and responsible parties at the client employer among the people who can be responsible.

How do payroll providers hide that they didn't pay a client's payroll taxes?

In the case the Justice Department announced in April 2025, a Florida payroll company charged clients their full tax liabilities but filed employment tax returns that substantially under-reported them and kept the difference: for one 2021 quarter, about $219,000 collected from a client, a return claiming about $32,000, and about $190,000 kept. The owner was sentenced to 50 months and ordered to pay over $22.4 million in restitution. Checking that each deposit matches the return wouldn't catch that; comparing the return with your own payroll register would.

• In a Missouri case sentenced in September 2026, the founder of a payroll company that had taken payroll tax money from clients stopped paying the IRS on their behalf in 2016. According to local reporting, clients were given fake documents showing payments had been made, and when late-payment notices arrived they were told the IRS was slow processing payments or had misapplied them.
• The Taxpayer Advocate Service warns that a dishonest third party might change your address of record with the IRS to its own, so you don't see notices about problems on your account. The law now requires the IRS to confirm an address change at both the new and the former address.

How can an employer check its own federal payroll tax deposits with the IRS?

EFTPS is the Treasury's free payment system. The IRS says employers should make sure their provider uses it, register for their own PIN, and use it to verify payments; registered employers get online access to 16 months of payment history and can make payments the provider isn't making.

• The IRS Business Tax Account (page updated October 16, 2026) lets a sole proprietor, partnership, S corporation or C corporation official view the account balance, payment history, tax transcripts and IRS notices. It isn't yet available for LLCs that file as sole proprietors on Schedule C or F, so those businesses rely on EFTPS, transcripts requested another way, and the phone line.
• If you were defrauded by a third-party payroll preparer, the Taxpayer Advocate Service says to tell the IRS at first contact, ask about an offer in compromise (an Effective Tax Administration offer gets special consideration for victims of such preparers), and ask the revenue officer not to assert the Trust Fund Recovery Penalty.