To amend the Internal Revenue Code of 1986 to establish procedures relating to the attribution of errors in the case of third party payors of payroll taxes, and for other purposes.

If enacted, employers will become the primary target for IRS penalties and audits arising from payroll tax errors, even when those errors originated with information employers provided to processors but were not caught by processor verification systems. Payroll processors gain legal safety from liability for foreseeable errors. In practice, this may reduce processor incentive to invest in error-detection systems and verification procedures, since employers cannot hold them liable even for errors a reasonable processor should have caught. Employers relying on processors may face significant tax liabilities and audit burdens. The analogous private-sector outcome: liability shifting from service providers to clients typically increases client costs and reduces service quality incentives, as seen in other outsourced compliance fields where service providers face limited liability (e.g., tax preparation services with limited E&O insurance requirements). No CBO analysis, GAO study, or prior federal legislation establishing similar payroll processor liability protections was cited in the bill text.