Tax season is probably the most dreaded time of year for HR and payroll teams. With high-anxiety to get W-2 earned-income forms, you are on the run to get everything ready, while also contending with having to complete your organization’s taxes as well. However, HR providers can play an instrumental role in helping to prepare for tax day. Here’s how:
Payroll Tax Software
If your HR provider offers payroll tax software, you can use it to prepare all the reports and forms required. It is a time-saving step that allows you to access the information not only your accounting team needs but also the W-2 forms your employees need. Payroll tax software assists by:
- Making it easier to submit tax documents
- Saving time on processing at all levels
- Avoiding payroll-related tax errors
- Identifying errors in real-time so you aren’t caught trying to match up errors and track where they occurred, or worse face an audit because the error is sent to the IRS
If errors were made on W2s already distributed, HR providers can submit a corrected Form W-2C.
Important documents are organized and saved in easy-to-access files so when tax time rolls around, all preparation is complete. Failing to send your employees their W-2s on time can lead to a fine of $30 for every W-2 form sent 1-to-30 days late and $100 per W-2 for 30+ days.
As mentioned above, HR providers provide tax software designed to make tax season headaches less severe. Part of the process is monitoring payroll so you can avoid penalties and other tax-related issues. In other words, the errors won’t happen in the first place. Through proper monitoring, your HR provider is helping you prepare, not at the end of the year, but instead as each payroll is prepared and submitted. Deductions are managed and submitted so that there is no time wasted and you are doing things throughout the year, not scrambling to adjust at tax time.
In hand with monitoring payroll to payroll, audits are also conducted automatically for each payroll every cycle. This eliminates year-end tax surprises because your account activity is addressed proactively so problems don’t go unnoticed. The right HR provider uses software that meets IRS Business Acceptance Testing requirements, so you know you are not inadvertently breaking laws.
Automated Payroll Tax
Payroll tax software creates records in real-time, as everything is automated. Preparation, therefore, is eliminated because the information and records are compiled along with each payroll submission. Your HR provider uses software that is legal and tax compliant, working in hand with your time tracking and payroll systems. As a result, everything is automatically aligned so there are no discrepancies between what your employees submit and the withholding you completed throughout the year. Everything is filed on time automatically, so you remain compliant and avoid penalties. You have a tax specialist doing the day to day tasks so that you are also completing your 941 e-filing properly and on time.
Your HR provider also takes a proactive approach to ensure withholding for each employee is handled properly. This avoids demands on your team with employees complaining, or asking questions when they find their withholding is either not enough to offset taxes or they’ve withheld too much. Your HR provider utilizes the Employee’s Withholding Certificate, to ensure accurate income-tax withholding based on recent tax code changes.
Accurate Benefits Reporting
Another issue that can lead to an onslaught of employee questions or discrepancies is whether or not eligible benefit deductions were taken on a pretax basis. This can cause issues as if done incorrectly, it can lead to a higher tax liability for employees. Because your HR provider uses software that can work in hand with benefits, things such as the amount in an employee’s health savings account or their 401(k) contributions are always available as the system can track payroll deferrals. As well your HR provider can make it easier for employees to choose to allocate things such as their HSA contributions to the prior year if they find it works better for them.
Forms 1095-C or 1095-B
If you have 50 or more full-time or equivalent employees, you must still file Forms 1095-C with the IRS with a copy to each employee in some states. This shows your organization offered eligible employees health coverage compliant with the Affordable Care Act (ACA). If your company is smaller, then you distribute Forms 1095-B. This can be handled by your HR provider if you are in a state where the forms are still required so that you are better prepared for tax season.
About The Author
Ingrid is the Content Marketing Manager at Paypro, managing both inbound and outbound marketing initiatives for the company. She has 15+ years’ of extensive marketing communications experience, leveraging brand awareness and strategic partnerships to increase sales revenue for a diverse group of B2B brands.