How Employers Can Prepare Employees for Tax Season
- Lauren Hargrave
- 5 min read
With tax season upon us, employers all over the country are fielding questions from their employees about how and when to file their taxes. And while the job of Human Resources (HR) is to help employees with the process of being employed, there are legal limitations to that help.
The things an employer can help with include: general tax tips, answers to general questions about common deductions like charity donations, retirement account contributions, filing deadlines and which tax forms may be necessary for the employee to file. An employer can also provide professional resources like access to a tax expert to answer employees’ specific questions.
What an employer should not do is offer specific tax advice. Offering specific tax advice opens an employer up to legal liability. An employer should also avoid completing most tax forms for an employee. Below are some tips to help employers successfully navigate tax season.
1. Offer educational support and resources
To help employees successfully file their taxes on time, there are a multitude of resources and avenues of support you can offer them. Here are some ideas for educational opportunities and outside resources you can provide:
- Employee discounts at a reputable local tax firm. This will require some vetting, but if your accounting or finance department can research local tax firms and suggest potential partnership options, this could be a good way to help employees get their taxes prepared professionally at a reduced rate.
- Corporate discounts on DIY platforms. Many employees won’t need professional help in filing their taxes and for them, so a DIY platform like TurboTax could be the best option. Setting up a corporate discount on many of these platforms can be as easy as a phone call.
- Newsletter with links to important resources. Sending a newsletter that includes the necessary filing deadlines and links to important resources like the Free File Service from the IRS for low to moderate income earners and the earned income tax credit (EITC) calculator can help employees determine whether or not they’re eligible for these services. Make sure to include any access information to corporate discounts.
- Remind employees about the Saver’s Tax Credit. The Saver’s Tax Credit is a credit low and moderate income earners can receive on their taxes for contributions made to a retirement account.
- Alert employees to remedies for incorrect withholdings. If employees withheld too much from their paychecks last year, they will receive a tax refund. But if they didn’t withhold enough, they could owe taxes which might be an unwelcome surprise. But there are remedies. One remedy is to contribute more money to their Health Savings Account (HSA). Employees who haven’t met the annual contribution limit can make additional contributions up until their filing deadline and have them count toward their past year’s taxes and limit. This is known as making a "prior year contribution." The same is true for contributions to retirement accounts.
- Tell employees what to do in the case of a payroll processing error (e.g. benefits were improperly categorized as pre-tax or post-tax). If you provide an amended W-2 after they’ve filed their taxes, make sure they know how to file an amended tax return if it’s necessary.
- Information for multi-state filers. If you have a mobile workforce, you might have employees who earned money in more than one state. Make sure they have the information they need on non-resident state tax credits and where and how they work. Make sure they also know in which states they need to file.
2. Help employees review W-4 forms
The goal in filling out their W-4 forms should be to withhold the correct amount each year so employees neither owe taxes in April nor get a refund. But the W-4 forms can be confusing to complete so many employees end up withholding too little from their paychecks throughout the year and get a tax bill when they file. To prevent this, encourage your employees to review their W-4 forms.
You can’t complete a new form for them, but you can encourage employees to go through the process again to see if their forms are accurate for their current situation. The new W-4 forms are designed to be simple and ask straightforward questions that help employees accurately determine the appropriate amount to withhold from each paycheck.
3. Sponsor a tax prep seminar
Since you as the employer should not provide specific tax advice to your employees, consider bringing in one or multiple tax accountants or advisors to help employees prepare their taxes. You can schedule it as a “lunch and learn” or town hall with a special guest and have the tax professional go over important general information for the relevant tax year (and maybe highlight coming changes for the current tax year to help employees prepare). Your employees can then submit their specific questions to the tax professional. This can be helpful because many employees have the same or similar questions that can be answered efficiently in a public forum.
Alternatively, you can host a tax prep clinic onsite or at a partner firm where you bring in a tax professional and employees can schedule time with him or her to go over their specific tax prep questions. This can be helpful if employees don’t feel comfortable asking their tax questions in front of others.
4. Offer financial wellness programs
Tax season can be a time during the year when employees’ financial stress gets more acute, but recent studies have shown it affects them and their work year-round. Employees that experience unexpected bills and have no way to pay for them because they have little to no savings, or because they have little wiggle room in their budget, are more likely to suffer financial stress. This financial stress can cause absenteeism, a loss in productivity and presenteeism (where the employee is present at work but dealing with a personal issue instead of actually working).
To help combat financial stress, employers can offer financial wellness programs and benefits. Some examples include:
- Personal finance coaching
- Online personal financial education. Common topics that employees need help with include: household budgeting, managing credit and debt, investing, saving, taxes and insurance.
- Budgeting tools
- Resources for keeping track of their credit score
In addition to these resources you can help lower employees’ financial stress by offering company-sponsored ways to save. These include offering a retirement plan and automatically enrolling employees, and offering medical savings accounts like HSAs and Flexible Spending Arrangements (FSAs) to give employees ways to save for qualified medical expenses. An added bonus is that employers can contribute too and potentially lower your FICA taxes.
Get started with Lively today
There are many ways employers can help their employees get through tax season with less stress . For more ideas and helpful information, check out our extensive resource center and HSA tax guide, and don’t hesitate to reach out to us to discuss benefits solutions that help both employees and employers save money on health expenses. Lively is your partner in offering the best benefits package possible at a price that works for your budget.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.