Tax Season & Economic Volatility: 6 Ways to Support Your Employees
Daniel Lee, CFA, CFP®
Tax season can be a stressful time for employees, especially when changes in life circumstances such as starting a new job or getting married come into play. This year may be particularly stressful for employees who are saddled with financial concerns and worried about how they’re going to afford to file and pay their taxes. Now more than ever, it’s important to help your employees recognize how they can benefit from tax planning resources and credits.
While HR teams are eager to support employees in navigating tax concerns, they aren’t best qualified to provide tax advice. Here are some ways employers can provide their employees with access to expert tax advice, guidance and filing support.
Communicate Early and Often
W-2s are due by January 31 each year. This is also a good time to send reminders, helpful explanations and resources to employees to better help them prepare their taxes. Remind employees to review their tax withholding to help ensure the correct amount of taxes are taken out throughout the year. This is particularly important following major life events such as marriage or having children.
Host Educational Sessions
Tax planning is an important step in an employee’s path to financial wellness. Provide employees with access to education and information sessions on tax planning, including strategies for reducing their taxable income. Consider hosting lunch-and-learns and directing employees to other resources that are available to them, such as tax planning guides and relevant educational materials in the BrightPlan Academy.
Address Equity Compensation Questions
Questions about the tax implications of equity compensation are among the most common for BrightPlan’s financial planners. Given the complexities surrounding the topic, it’s important to provide employees with resources on how taxes are determined for restricted stock units (RSUs) and employee stock purchase plans (ESPPs). Additionally, when stock vests, it’s often standard for employers to withhold 22% for Federal taxes. Consider providing employees with the option to withhold more than the minimum, which can be especially helpful for higher income employees who don't want to owe taxes later on.
Provide Discounts on Tax Services
Employers can help offset the costs of tax preparation services by providing employees with a discount on professional tax services. However, some employees may not have complicated tax situations or don’t have the means to pay a tax professional to file their taxes for them. For employees that prefer a more hands-on approach, consider offering discounts for do-it-yourself tax preparation services, such as TurboTax and H&R Block.
Let Employees Know About Free Services
Let employees know about free tax filing services that may be available to them. The IRS Free File service is a partnership between the IRS and tax software providers that lets anyone who earned less than $73,000 in 2022 prepare and electronically file a federal return at no cost. Along with the Free File service, many employees are eligible for free tax help from trained volunteers at community sites around the country. The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who make $60,000 or less, persons with disabilities, the elderly and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals.
Offer Resources for Underserved Populations
There are a number of tax credits available to certain employee populations, including credits specifically for employees who are disabled, low or moderate income wage earners, and those who are providing care for a child or other dependent. For example, there’s a saver’s credit for lower income workers who contribute to a qualified retirement account. There’s also the earned income tax credit (EITC) that provides qualified taxpayers as much as $6,935 in tax credits in 2022. Educating employees on the most common types of tax credits can help reduce their overall tax liability.
Tax season can be a stressful time for employees. Help make it a little easier by providing employees with the education and support they need to manage their taxes with ease. The financial planners at BrightPlan can help employees navigate tax complexities and leverage your company's benefits to reduce tax exposure. Learn more.