While HR is generally seen as being associated more closely with payroll than taxes, there is a huge overlap between the two. This means that at some point any given business will end up relying on its HR team to help in ensuring that its taxes are filed and paid appropriately. HR professionals can provide invaluable help with both employer and employee tax filing if they educate themselves, stay organized, and keep up to date on the ever-changing tax code.
Both Employers And Employees Rely On HR During Tax Season
Though HR professionals are by no means tax experts, their role within a business often leads to tax questions from both employers and employees. A well-trained HR team will be able to address questions from both with ease, whether they are related to personal or business taxes. HR departments are the main conduit of communication between organizations and employees, and it is important that they be able to help either when it comes to tax preparation.
The tax code changes relatively regularly, so it is to be expected that employees may have questions that go beyond how to appropriately fill out a W-4. For example, many employers encourage their employees to open health savings accounts, and employees who do might find themselves wondering what contributions to their HSA are deductible or what the limit for annual contributions might be. HR staff should be prepared to assist with these questions as it will ultimately help both the employee and the organization.
Assisting your employer with proper filing and helping employees with any questions they might have is important as an HR professional, however, there are limits to what can be done. HR teams can give as much advice to employees as they like regarding how to fill tax forms like a W-4, but filling one out for an employee is illegal. Understanding the limitations of how much an HR department can and cannot do helps to maximize efficiency while reducing any legal risk to the organization.
Organization Is Key
When HR teams assist a business with the proper filing of taxes, it is of utmost importance that they maintain a high level of organization. Keeping an accurate record of tax records through digitally scanning them and avoiding using easily lost physical documents is essential. Additionally, keeping a detailed log of business expenditures within the HR department and any documentation that might prove useful when filing taxes should be a priority.
Timekeeping is also incredibly important for HR professionals. Keeping track of nonexempt employees’ hours worked is essential in order to remain compliant with both national and state tax authorities. Doing so will prevent headaches in the long run and make the job of filing appropriately that much easier.
The ability for HR professionals to keep tax-relevant documentation organized is increasing rapidly. This is due largely in part to the rise of advances in cloud storage and big data. These new and powerful technologies allow HR professionals to not only execute their daily operations more efficiently but to keep important information like tax documentation organized and readily available as well. Despite the ease of the cloud for storage, however, it’s imperative that HR professionals understand how to make and keep backups of all important data as well, in case of emergency.
Keeping Up With The IRS
The IRS processes around 240 million tax returns every year generating nearly $3 trillion in tax revenue. While this is impressive, the IRS relies on both private citizens and companies alike to file their taxes promptly and appropriately in order to avoid having to perform an audit if there are any discrepancies detected. Avoiding an audit is obviously preferred for any organization, so ensuring that all levels of an organization, including the HR department, are well versed in recent changes to tax code is a good idea.
The United States tax code recently saw its most substantial reform in over 30 years in the form of the Tax Cuts and Jobs Act. The changes made to the tax code by the Tax Cuts and Jobs Act have far-reaching implications for both employees and the organizations that employ them and because of this, it is imperative that HR professionals understand how the changes to the tax code affect their business.
Payroll systems had to change across the board after this legislation passed as it affected individual income tax rates and brackets. Additionally, the Tax Cuts and Jobs Act eliminated the ability to deduct the expenses from popular employer-provided fringe benefits such as deductions for parking and transportation expenses for employees.
In an era where transparency is increasingly appreciated by employees, especially when it comes to salary and payroll, it is important for HR professionals to be able to explain these changes if questions arise. While there is no certainty what future tax code reforms might hold for employees and organizations, HR professionals would be wise to remain up to date on any changes that might affect them.
HR teams are some of the most important and unsung aspects of any business or company, and the ability to assist both employers and employees with tax filing questions adds yet another notch to an already impressive list of skills. If HR professionals stay on top of keeping the appropriate documentation organized and accessible and stay on top of any changes to the U.S. tax code, they will be more than equipped to answer nearly any question asked of them.
The HR Tech Weekly® 