An employee has been audited due to an error in his w-2 that was corrected by our company (we used a payroll service to prepare the w-2's)but he claims he never received the revision. The w-3 and his w-2 showed the discrepancy. The federal withholdings listed were wrong, it showed he had more paid in than had been withheld. Now he will owe taxes, penalties and interest. ( this was for 2006) As an employer what liability we do face?

an employee has been audited due to an error in his w-2 that was corrected by our company (we used a payroll service to prepare the w-2's)but he claims he never received the revision. the w-3 and his w-2 showed the discrepancy. The federal withholdings listed were wrong, it showed he had more paid in than had been withheld. Now he will owe taxes, penalties and interest. ( this was for 2006) As an employer what liability we do face?


If you use a payroll service they should take care of the interest and penalties as a courtesy to you - or, depending on your agreement with them, it may be their responsibility.

The employee has no direct relationship with the employer so going to you for their out-of-pocket is their only choce.

There is also a legal theory that if something is mailed and not returned to the addressor it is "assumed" delivered - but in this case I think that might be a stretch.