Facts: A pediatrics practice hired a payroll service to handle its accounting matters. Subsequently, the firm discovered that the payroll service’s principal had embezzled funds that were supposed to be paid to the IRS. The principal was eventually prosecuted for the crime. He was sentenced to 37 months in prison and ordered to pay more than $840,000 in restitution to the medical firm.

But the Third Circuit Court said that the medical practice can still be held liable for the unpaid employment taxes. The reliance on the payroll service does not absolve the business of its tax responsibilities.

This case points out the need to use reputable parties to handle payroll matters. Confirm that tax payments have been made in a timely manner.