Overview: Historic Liability Debit (HLD) refers to the collection of unpaid tax liabilities from payrolls processed by a company’s previous payroll provider. When an employer switches to Buddy Punch Payroll (powered by Check), any outstanding liabilities must still be paid to the appropriate tax agencies. To ensure compliance, Buddy Punch will debit the employer’s account for these amounts and remit them to the agencies.
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Why Historic Liability Debits Happen
When an employer terminates services with a prior payroll provider, that provider will often return any unpaid tax liabilities back to the employer’s bank account. These funds must then be collected by Buddy Punch and applied correctly to the appropriate federal, state, or local tax agencies.
Determining Which Liabilities Must Be Paid
Historic liabilities are collected and remitted if they fall within an open period.
A period is defined by the tax payment frequency: monthly, quarterly, or annual.
An open period means that both the company’s start date and the liability date fall within the same tax period.
Example:
For a tax with monthly frequency:
If the company start date is in March but the tax liability is from February, that liability is not in an open period.
For quarterly or annual frequency:
If the start date and the tax liability fall in the same quarter or year, the liability is in an open period and will be collected.
When the HLD is Collected
The Historic Liability Debit is scheduled after the employer’s first payroll approval deadline.
It is automatically scheduled for 10 days after the employer’s first payday.
Employers should be prepared with sufficient funds in their account on this date to cover the debit.