Louisiana Payroll Tax Default Prevention Checklist
Louisiana employers must manage two distinct payroll tax obligations administered by separate state agencies. The Louisiana Department of Revenue oversees state income tax withholding from employee paychecks, while the Louisiana Workforce Commission administers unemployment insurance taxes paid by employers. When required deposits or tax returns are missed, the responsible agency initiates collection actions that escalate quickly.
Penalties and interest accumulate on unpaid taxes, making early resolution essential.
Understanding the difference between these tax types, recognizing default triggers, and knowing the proper response procedures can help employers maintain compliance and avoid serious financial consequences.
What This Issue Means
A Louisiana payroll tax default occurs when an employer fails to meet filing or deposit obligations by their due date. For state income tax withholding, this means missing deposits to the Louisiana Department of Revenue or failing to file Form L-1 quarterly returns. For unemployment insurance, this involves missing tax payments or failing to file Form LWC ES-4 with the Louisiana Workforce Commission.
Each agency tracks compliance independently through automated systems. When obligations become overdue, the account is flagged as delinquent, and the agency sends a written notice demanding payment or corrective action. The default remains on
record until resolved, and the agency may pursue increasingly severe collection activity if the employer does not respond promptly.
Why the State Requires This
The Louisiana Department of Revenue requires timely withholding tax deposits because these amounts represent employee income taxes deducted from wages. Employers withhold these taxes in accordance with employee withholding certificates and must remit them on quarterly, monthly, or semimonthly schedules, depending on the withholding amounts. The Louisiana Workforce Commission requires employers to pay unemployment insurance because these employer-paid taxes fund the state's unemployment benefits system.
Both agencies need accurate, timely reporting to administer their respective programs properly. Common default triggers include missed deposit deadlines, unreported wage information, calculation errors, and incomplete filings. The responsible agency identifies defaults through electronic filing systems that compare expected deposits against reported wages.
Notices are issued to create a formal record, inform employers of the problem, and establish timelines for resolution before escalated collection procedures begin.
What Happens If This Is Ignored
Ignoring a payroll tax default notice allows the situation to worsen rapidly. The Louisiana
Department of Revenue or the Louisiana Workforce Commission will send additional demands for payment as the case progresses through the collection process. Penalties
begin at 5% of the unpaid tax and increase by 5% every 30 days, reaching a maximum of 25%. Interest accrues continuously on the unpaid balance.
As of January 1, 2026, Louisiana charges 10.50% annual interest (0.8750% monthly) on
unpaid tax obligations under Revised Statute 47:1602. The combined effect of penalties and interest can substantially increase the total amount owed within a few months. The agency may file a tax lien against business or personal assets, creating a public record that affects credit access and property transactions.
Louisiana Revised Statute 47:1561.1 authorizes the Louisiana Department of Revenue to pursue personal liability against corporate officers, managers, or members who have direct control over withholding or sales taxes and willfully fail to remit collected amounts.
Bank levy actions, wage garnishments, and other enforcement actions become increasingly likely as the default continues unresolved. Business licenses or permits may be suspended or revoked, directly impacting the ability to operate legally under
Louisiana law.
What This Does NOT Mean
Receiving a default notice does not mean the business is being shut down immediately or that criminal charges have been filed. The notice does not indicate that bank account levies have been placed or that liens have already been filed, although these actions may occur if the situation remains unaddressed. A default notice does not eliminate tax relief options.
Both the Louisiana Department of Revenue and the Louisiana Workforce Commission provide information about payment arrangements, penalty abatement requests, and
other administrative remedies. Employers retain the right to dispute incorrect assessments by providing documentation. The notice does not automatically affect personal credit reports, though unpaid business tax obligations can lead to liens or judgments that may indirectly impact creditworthiness.
Officers or owners are not automatically held personally liable at the notice stage. Still, personal liability may be pursued if the business fails to resolve the tax debt and the statutory conditions for officer liability are met.
Checklist: What to Do After Receiving a Payroll Tax
Default Notice
Step one: Review the notice thoroughly to identify which agency issued it (the
Louisiana Department of Revenue or the Louisiana Workforce Commission), the specific tax type involved, the tax periods in question, the amount claimed, and the response deadline.
Step two: Verify the assessment's accuracy by comparing the notice against your payroll records, deposit confirmations, filed returns, and bank statements to confirm whether the claim is correct.
Step three: Gather all relevant documentation for the periods in question, including payroll registers, deposit receipts, filed forms (L-1 for withholding or LWC ES-4 for unemployment insurance), bank statements, and prior correspondence with the issuing agency.
Step four: Contact the issuing agency immediately using the contact information provided in the notice to discuss your account status, verify what is owed, and understand why the default was assessed.
Step five: Ask about available tax relief options, including immediate payment terms, payment installment plan arrangements, penalty abatement procedures, or dispute processes if you believe the assessment is incorrect.
Step six: If the notice contains errors, prepare a written response with supporting documentation such as deposit receipts, bank statements, or filed returns showing the correct information or proving that required payments were made.
Step seven: If the amount is correct. Still, immediate payment is not possible; request tax information on payment plan eligibility and gather any financial documentation that may be required, such as recent bank statements and profit-and-loss statements.
Step eight: File any missing returns immediately using the correct forms for the tax type involved (Form L-1 for withholding tax or Form LWC ES-4 for unemployment insurance), including written explanations for delinquent filing when appropriate.
Step nine: Submit payment plan requests or penalty abatement requests in writing according to agency instructions, including all required supporting documentation and proposing specific payment terms you can realistically meet.
Step ten: Maintain organized records of all correspondence, submission confirmations, phone call notes, and copies of payments made, keeping separate files for each tax type and agency.
Step eleven: Prioritize meeting the response deadline stated in the notice, as missing this deadline can limit available resolution options and trigger automatic collection procedures.
Step twelve: Respond promptly to all follow-up notices or information requests, providing complete and accurate information to avoid delays or automatic enforcement actions.
What Happens After This Is Completed
After you contact the responsible agency and provide the requested information, the agency will review your submission and update your account accordingly. If you have filed missing returns or made required deposits, the agency will process these submissions and adjust your balance. Processing times vary depending on the complexity of the submission and the agency's current workload. If you requested a payment installment plan or penalty abatement, the agency will issue a written decision outlining approved terms, any penalty adjustments, and ongoing payment obligations.
During the review period, continue making all current payroll tax deposits and filing all returns on time to demonstrate good faith compliance. Once the default is resolved and payment arrangements are fulfilled, maintain full ongoing compliance to prevent future collection actions. Keep a record of the resolution for future reference, and verify that your account reflects the correct status after the matter is closed.
Common Mistakes to Avoid
- Ignoring notices does not make tax problems disappear. Non-response allows
penalties assessed to accumulate while triggering escalated collection procedures that are more difficult to resolve.
- Missing response deadlines limit available options and may result in immediate
enforcement actions, such as tax lien filings or levy placements, without further notice.
- Continuing to make incomplete or incorrect deposits during a default period may
be treated as ongoing non-compliance, worsening your situation with the agency.
- Failing to file missing returns prevents the agency from processing penalty relief
requests or payment arrangements, as complete documentation is required for most administrative remedies.
- Ignoring follow-up notices after responding to the initial notice can result in
automatic collection action, as each notice typically includes its own deadline and required response.
- Providing incomplete documentation when requesting payment plans or
delinquent penalty relief often results in denied requests or significant processing delays requiring resubmission.
- Making inconsistent payments under an approved payment agreement can
terminate the arrangement and trigger immediate collection action on the full remaining balance.
- Assuming errors will be discovered and corrected automatically is unrealistic; you
must provide written documentation proving the assessment is incorrect.
Frequently Asked Questions
What is the difference between withholding tax and unemployment insurance tax?
Withholding tax is state income tax deducted from employee paychecks and remitted to the Louisiana Department of Revenue. Employers pay the unemployment insurance tax based on employees' wages and remit it to the Louisiana Workforce Commission.
These are separate obligations managed by different Louisiana government agencies with various forms and procedures.
Can I negotiate the amount of payroll taxes owed?
The tax amount itself is based on documented wages and statutory rates and is generally not negotiable. However, penalties added to the tax may be subject to abatement requests under Louisiana Revised Statute 47:1603 if you can demonstrate reasonable cause rather than negligence for the delinquent payment or filing.
Will unpaid payroll taxes appear on my personal credit report?
Unpaid business taxes do not automatically appear on personal credit reports. However, if the state files a lien against personal property or pursues collection against personal assets under officer liability provisions, these actions may become public records that affect creditworthiness.
What is the difference between penalties and interest on state taxes?
Penalties are charges imposed for non-compliance, starting at 5% of unpaid tax and increasing by 5% every 30 days, up to 25%. Interest compensates the state for delayed
payment and accrues continuously at the rate set annually by statute (10.50% annually for 2026). Both apply to unpaid balances and increase total tax debt over time.
What happens if I miss a payment under an approved payment plan?
Contact your assigned agency representative immediately if you are unable to make a scheduled payment. The agency may allow a brief extension, modify the plan terms, or terminate the agreement depending on circumstances and your payment history.
Specific policies vary by situation and agency discretion.
Can I contest a payroll tax default assessment?
Yes. If you believe the assessment is incorrect, respond in writing with documentation supporting your position, such as deposit receipts, bank statements, or filed returns.
The agency will review your submission and issue a determination based on the evidence provided.
What if I cannot afford to pay the full amount?
Contact the responsible agency to discuss installment payment plan options. Payment plans allow you to pay the balance over time according to an agreed schedule. Inquire about eligibility requirements, timeframes, and approval processes when you contact the agency to explore available tax resolution options.
Can payroll tax debt be discharged in bankruptcy?
Tax debt and bankruptcy involve complex legal rules that vary by tax type and circumstances. Withholding taxes are generally considered trust fund taxes that are not
dischargeable in bankruptcy. Consult with a tax accountant or tax professional for guidance specific to your situation and personal circumstances.
How do I access online services for Louisiana tax payments?
The Louisiana Department of Revenue provides LaTAP File & Pay, an online system for filing returns and making electronic payments. You can access this system through the
Louisiana government website to file returns, make payments, and manage your tax account electronically.
Should I hire professional help for tax problems?
Complex tax situations, significant tax debt, or pending collection actions may benefit from professional assistance. A tax accountant or tax professional can help you understand your options, prepare accurate documentation, and communicate effectively with state agencies to achieve the best possible tax resolution.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and are unsure how to respond, our team can help you understand your options and next steps.
We help with
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
20+ years experience • Same-day reviews available
