With the tax deadline just two months away, now is the time to prepare—ready or not! Now that W-2 earned income forms have been distributed, as an HR professional, you can do your employees a favor by sharing a few tips designed to help ease the stress of tax preparation.
Helping Employees Navigate Tax Preparation
The tax-filing deadline is fast approaching. Many experts consider this the ideal time for employees to look over their W-2 forms and make changes in order to prepare for next year’s taxes. There are several key areas in which to focus:
Review Withholdings. Some employees receive an unpleasant shock when preparing their income taxes: they may be withholding too little to offset taxes owed. Some people have the opposite problem and withhold too much. In December, the IRS released a new 2020 Form W-4 (Employee’s Withholding Certificate) that contains revisions designed to make income-tax reporting more accurate. The new form includes tax code changes and substitutes more straightforward questions for complicated worksheets in order to ensure simplicity, accuracy and privacy for employees, and also helps reduce the burden on employers and payroll processors. In addition, there’s a new online tax withholding estimator that offers recommendations on adjustments. With too few people withholding the correct amount from their paychecks, this is a good time to educate employees on the importance of reviewing paycheck withholdings and contributions to retirement accounts.
- IRS Free File. Employees earning less than $69,000 in 2019 can prepare and electronically file their federal tax returns at no cost through the IRS Free File program. This service simplifies the process, gathering all forms and doing all the math. In addition, state returns can be prepared for free or a fee. Be sure to let eligible employees know about this valuable service.
- Check Benefits Reporting. It’s important for employees to check the wages reported on their W-2 forms to confirm that all eligible benefits were pre-taxed. Errors may result in higher tax liabilities. Be sure to check contributions to health savings accounts (HSA) and 401(k) plans.
- Use HSAs for Last-Minute Withholding. Employees who didn’t withhold enough from their 2019 pay may still be eligible to make contributions to HSAs right up until the tax-filing deadline (April 15) as long as they have not met the maximum contribution threshold ($3,500 for self-coverage and $7,000 for family coverage in 2019). Last-minute contributions can be allocated to the previous tax year in order to reduce the employee’s tax burden.
Helping employees with tax tips may not technically be a part of your job description, but it can help ease their stress and result in less work for you in the long run.