What is a withholding audit?
Every pay period, an employer must withhold tax on employees to remit to the tax agencies as the tax becomes due. Computation of payroll tax is very complex due to the number of factors that are involved. As a result, employers often make mistake and submit the improper amount of tax. In addition, employers also forget or simply fail to pay the tax. In an attempt to reconcile the tax agency’s records with the taxpayer, tax agencies conduct audit of the company’s payroll records. The process involves submitting other records that contain limited information related to payroll such as corporate tax returns to verify salaries, cost of goods sold, outside service line items.