When most individuals think of tax season, their minds jump to April. And hopefully a refund check. However, people are missing out on four months of preparation if they wait until April to assess their tax health. While the tax-planning responsibility rests with employees, there’s room for employers to help. As we’ve now entered the new year, here are a few topics HR can communicate to help foster a healthy tax outlook for 2019 and beyond:
Encourage employees to evaluate their paycheck withholdings and W-4 election
According to the Government Accountability Office (GAO), 30 million people are on track to owe money because they did not withhold enough from their taxes.
The IRS expects individuals to meet withholding safe harbor requirements to avoid an underpayment penalty. An individual may need to increase their withholding/estimated payments if they are projected to be too low. Adjusting allowances on a W-4 or changing estimated payments that are made quarterly is a common method for adjusting tax prepayments.
Employers should provide guidance on when and how employees should expect to receive the 2018 W-2 and 1099-R tax forms. Receiving these forms can serve as a good opportunity for employees to reevaluate their withholdings and adjust as needed.
Educate employees on the benefits of maxing out 401(k) savings and other tax-advantaged accounts
Make sure your employees are educated on the positives and negatives of withdrawing from their 401(k) pre-retirement. While not all financial planners encourage individuals to max out their 401(k) savings, participants who make tax-deferred contributions can write them off of their income to see significant savings during tax time.
Remind employees they can still make one change to their 2018 taxes
If employees have not maxed out their 2018 IRA contributions, they can contribute toward that cap until the IRS tax filing date, which is April 15, 2019.
Taxes are one of the largest expenses your employees will face, and that’s not changing any time soon. Employees will continue to put less money toward their retirement accounts if they aren’t aware of how they can optimize their tax profile. Make the effort now to help your employees by communicating efficiently and effectively. A small investment in your employees’ financial health can pay off for everyone in the long run.
Bukaty Companies provides comprehensive financial services and HR consulting services. If you have any HR-related questions, please contact Bukaty Companies at 913-345-0440 and ask for Randy Woehl, MPA, SPHR, SHRM-SCP, director of HR consulting services. To learn more about our Individual wealth management services call 913-204-0785.