Tax season can be a stressful time for your employees, which can impact their performance and well-being both inside and outside of the office. However, your human resources representative can provide support to help them file a return on time. At minimum, it starts with the proper dissemination of W-2 forms, which should be completed by January 31.st. There are several further steps that can be taken as well. Here are a few strategies to prepare your employees for Tax Season.
Offer a Seminar
You can either teach the course yourself or hire a one-time consultant to give employees a brief seminar with tips and tricks to optimize their filing process. Offering a crash course on tax filing is certainly not a requirement as an employer, but it will definitely be appreciated by your employees. Topics to cover should include a review of tax deadlines, efficient ways to file, and common mistakes that people make. These are a few tips worth sharing:
- File your return by the Tax Day deadline on April 15th. If you’d like to file for a 6-month extension to October 15th, the form must also be submitted by Tax Day.
- Choose direct deposit as your refund method and link it to a no-fees bank account. Direct deposit is the quickest way to receive your refund, and an account without service fees will make sure you get the most out of your return.
- Use tax software that is sponsored by the IRS. Free File is a trusted service that makes filing quick and easy while cutting down on errors.
Educate Employees on Tax Deductions
There is a possibility that employees may be able to deduct business expenses from their personal filing. One of the most popular deductions is for a home office. IRS Publication 587 has all of the necessary information to determine if they qualify. Typically, this deduction is based on the square footage of the home that is used for business purposes. There are several restrictions, however—the space must be used for business activities and employees cannot rent any portion of their home to their employer.
Another possible deduction could be operating an automobile for business purposes. An example of this would be using a personal vehicle to travel to an off-site client. Just like with a home office deduction, personal use and business use must be separated—employees can only count the miles that they drove for strictly business purposes. In order to prove this, they will want to document the mileage accurately. As of January 1st, 2020 the IRS standard mileage rate is 57.5 cents per mile.
Of course, you can always help your employees cover these expenses, in which case the reimbursements are typically tax-free. This allows your employees to travel hassle-free without incurring their own expenses, while also allowing the business to save money on taxes. Providing employees with company debit cards from a small business bank makes it easier to track and organize these expenses throughout the course of the year.
Revisit W-4 Forms
Throughout the tax filing process, your employees may realize that they have withheld too much to too little from their paycheck. Oftentimes, employees forget to update their W-4s, which is especially important if their financial situation has changed in the past year due to a promotion, raise, or life event. However, once they have made this realization, they should address it sooner rather than later. The best time for employees to make an adjustment to their W-4 is while tax filing is still fresh in their mind.
Employers can help make these changes by encouraging their employees to do so. During tax season, offer to schedule meetings with your employees to review their W-4 forms and make any necessary changes. This could be as easy as sending a memo to review withholdings to all employees. You can allow employees to reach out to their HR representative, or create “office hours” for which they can sign up for time slots to meet.
None of these tips are requirements from the standpoint of the employer, but they are simple solutions to help your employees prepare for tax season, which they are sure to appreciate.
*Information contained in this article is for educational purposes and not intended to be tax advice. Be sure to work with a tax professional if you need guidance or have questions.