This year’s tax filing protocol has many extra complicated factors and drawbacks for employers due to the pandemic. Individual filers got a break when the IRS extended the filing deadline to May 17 but not businesses. This year we noticed a dramatic increase in amendments which means fees. New government programs like PPP and tax credits created confusion, but not in every case. There are basic checks employers can make to avoid amended tax return filing and adjustment fees. In fact, knowing the ins and outs of the tax exceptions and exemptions can be the key to saving tens of thousands of dollars in fees.
Be Free from Fees After Tax Filing
If you haven’t double checked and/or vetted all of your employee information beforehand, you could face a potential audit, or at a minimum, the need to file an amendment or adjustment. The key to an error-free, seamless filing is to check all of the bases when it comes to payroll and withholding settings for all of your employees. Here are some of the areas to pay attention to that can be the difference between a successful filing or an unfortunate chiding by the IRS:
1) Payroll for the payoff:
It’s nothing new that all payroll must be finalized by the end of the calendar year, however it is critical to verify that there are no negative balances in YTD totals. Also, your Payroll department needs to check that manual or voided checks have all been entered into the system!
2) Audit employee data for accuracy:
HR must verify that each employee’s information is correct, starting with the fundamentals like his/her full [legal] name and social security number. Also, since tax laws vary from state to state, make sure that each employee’s information is set to the correct state. And pay especially close attention to those people who may live in one state and work in another!
3) Triple-check tax status settings:
Unfortunately, a VERY common mistake is when an employee puts the wrong information for his/her tax status or withholding set-up. This can have tons of implications for the federal and state withholding settings for the employee. For example, “Tax Blocked” means that no taxes will be withheld from payroll, but wages still show in Box 1 on the W-2. In contrast, “Exempt from Withholding” means that no tax is taken out and wages won’t be considered taxable in Box 1 of the employee’s W-2.
4) Speaking of W-2s, here’s the 411:
All W-2 info should be reviewed and verified A-OK that the correct W-2 Box has been populated for each earning and deduction type. If not, it will be kicked back and a W-2 correction needs to be submitted to the IRS, which causes more work and more money!
While you’d like to think as an HR manager that you have thought of everything when it comes to tax filing, in addition to the myriad of other day-to-day tasks that you need to remember, the truth is that most of us can use help.
OnePoint Payroll is updated with the latest tax rates and makes it easy tools to run a wide range of payroll audit procedures to keep payroll data healthy. Running payroll in an all-in-one HCM database reduces errors caused by data exports and lowers time spent dealing with exceptions and/or last-minute corrections that are common when you work in batch payroll solutions.