When you switch payroll providers in the middle of the year, it is important to know which taxes your old provider already paid and which Gusto will handle. This prevents duplicate payments, rejected filings, and errors in employee tax records.
Switching providers mid-year splits tax responsibilities. Without coordination, your business could face:
Double payment of taxes (especially unemployment taxes)
Rejected filings due to duplicate submissions
Incorrect wage reporting for employees
Confusion about quarterly and annual filings
⚠️ Important: Only one provider can file a quarterly tax return for any quarter. If both your old provider and Gusto file for the same quarter, the second filing will be rejected and may lead to penalties.
Coordinate with both providers to decide who will handle filings for each quarter.
Q1: Jan 1 – Mar 31
Q2: Apr 1 – Jun 30
Q3: Jul 1 – Sept 30
Q4: Oct 1 – Dec 31
When you're ready, enter previous payrolls in Gusto.
Your prior provider remains responsible for taxes and filings on the payroll they processed. They should have managed the following tax responsibilities:
If the payroll was in a completed quarter (before joining Gusto)
Federal tax deposits: Federal income tax and FICA (Social Security and Medicare).
State and local deposits: State income tax withholding and local taxes.
Quarterly filings: Form 941, state, and local filings.
Example: If you join Gusto on May 7, your old provider files Q1 forms (ending March 31).
SUTA: State Unemployment Tax deposits for wages from completed quarters.
FUTA: Federal Unemployment Tax deposits for completed quarters (unless the amount is under $500, which is due at year-end).
Note: If under $500, your old provider should refund you these taxes so Gusto can handle it. Let us know about this obligation.
If the payroll was in the same quarter you switched
Federal tax deposits: For pay periods processed with your prior payroll provider.
State and local deposits: For pay periods processed with your prior payroll provider.
Exception: Some state/local taxes are paid only at quarter-end. If you switched mid-quarter, your old provider should refund you the tax amount for the quarter you switched. Let us know about this obligation. Gusto will collect and pay these taxes. Some agencies require one full payment for the quarter.
Quarterly filings: For all quarters before you joined Gusto.
Example: If you join Gusto on May 7, your old provider files Q1, and Gusto files Q2.
SUTA deposits: For all quarters before you joined Gusto.
If you switched mid-quarter, your old provider should refund you the tax amount for the quarter you switched. Let us know about this obligation. Gusto will collect and pay these taxes. Some agencies require one full payment for the quarter.
FUTA deposits: Same as SUTA — Gusto will handle starting with your first quarter.
Note: If under $500, your old provider should refund you these taxes so Gusto can handle it. Let us know about this obligation.
If you switched mid-quarter, your old provider should refund you the tax amount for the quarter you switched. Let us know about this obligation. Gusto will collect and pay these taxes.
Once you switch, Gusto manages:
Federal, state, and local deposits for all payrolls run in Gusto.
Quarterly tax returns starting with the quarter of your first check date in Gusto.
FUTA and SUTA deposits starting with the quarter of your first check date in Gusto.
Year-end forms: W-2s, 1099-NECs, and annual filings (covering wages paid by both providers)
⚠️ Important: Only Gusto should file year-end forms. Make sure your prior provider does not file W-2s or other annual forms after your switch.
Unemployment taxes
Unemployment taxes have annual wage base limits. Once employees reach the limit, you no longer owe taxes for them.
Provide Gusto with year-to-date payroll info so we can avoid overpaying unemployment taxes.
W-2s and year-end forms
Only one provider should generate W-2s. If you switch mid-year, Gusto will issue all year-end forms, but we need complete year-to-date data from your prior provider.
To make the transition smooth, provide:
Documentation of payroll tax payments made this year
This ensures Gusto can calculate correctly, prevent duplicate filings, and keep your business compliant.
Q: Who files my quarterly taxes if I switch mid-year?
A: Your prior provider files for completed quarters. Gusto files for the quarter you joined (have your first check date in Gusto for) and forward.
Q: What happens if both providers file for the same quarter?
A: The second filing is rejected by tax agencies, which may cause compliance issues or penalties.
Q: Who issues W-2s at year-end?
A: Only Gusto. Make sure your prior provider does not file W-2s once you switch.
Q: What if unemployment taxes were already paid by my old provider for the quarter I switched?
A: They should refund you. Gusto will collect and pay them correctly for the quarter you joined.
Q: What reports do I need to share with Gusto?
A: Year-to-date payroll reports and proof of tax payments made earlier in the year.
When you cancel your Gusto account and select "I am switching to a new payroll provider or solution" as your reason, Gusto handles the tax handoff automatically.
What Gusto does:
Refunds your outstanding tax balance to your bank account
Stops all future tax payments and filings
Sets both tax payment and filing to No automatically (you do not need to choose these options yourself)
What you need to do:
Share your year-to-date payroll reports from Gusto with your new provider. They need this data to file accurately for the rest of the year.
Confirm with your new provider which quarter they will take over filing. Only one provider can file a quarterly return for any given quarter.
For full steps, see: Cancel your company's Gusto account (for admins)