Bloomberg Tax
March 20, 2023, 8:45 AM

Businesses Need HR Tech as Tax Compliance Grows More Complex

Craig Boelte
Craig Boelte

You learn a lot while helping to lead a fast-moving tech company. Challenges propel every step forward, and lessons line the footprints. Regardless of the size, industry, or pace of an organization’s growth, one truth applies: Compliance matters.

While some regulatory needs are unique to specific employers, complying with state and federal taxes is a year-round priority. And tax compliance isn’t about to become any less relevant.

Taxes touch nearly every area of a business. Did you hire a new employee? Or did you open a second location in a different state? What about a new income tax that went into effect where your company is based? All of these scenarios have tax implications, and organizations must consider each of them—and many more—to protect their liability.

Keeping up with every factor that influences taxes puts pressure on human resources departments and tax professionals. They need to be agile, primed for audits, and knowledgeable of the latest legislation.

However, that’s easier said than done, given that four in five HR pros are stressed about payroll, according to a OnePoll survey commissioned by Paycom. Imagine how much of their discomfort is fueled by complex and everchanging taxes.

I have written about how crucial HR tech is to strong, consistent operations. Similarly, the right tools are key to understanding, streamlining, and optimizing tax compliance.

How Does HR Tech Help?

Payroll tax management software helps to reduce the strain of tax compliance by automating tedious processes without losing accuracy. HR tech doesn’t change a company’s liability, of course, but it does help relieve a heavy administrative load.

For example, let’s consider the one thing all taxes share: a deadline for payment. Every tax credit and deduction affecting employees has a strict timing requirement. And it doesn’t take an enterprise-level workforce for these deadlines to overwhelm an HR team, let alone one professional. In the OnePoll survey, HR pros put missing a tax deadline among their top concerns.

When you have a litany of equally important dates to remember, how do you keep up with them? Do you try to memorize all of them or write them down on sticky notes to stick on your monitor? Hopefully not. Chances are you have an app to automatically remind you what you can’t afford to miss.

Payroll tax management software works the same way; intuitive dashboards and insightful reports make it easier for HR to track upcoming deadlines. Some options take this a step further by submitting tax payments on the company’s behalf. Regardless of how far HR tech goes to help address deadlines, it removes the burden of another manual process from an employer’s shoulders.

There’s also another inseparable, yet just as time-consuming requirement for tax compliance: forms. A company’s liability hinges on its ability to calculate and file tax information accurately and timely. But it could take a seasoned expert hours, if not days, to manually account for and process a company’s tax documents.

Most of us know how software exists to help individuals file their personal taxes. HR tech makes it easier for businesses, too. Prepopulating data, such as addresses and employer ID numbers, allows HR to simply verify information rather than tediously type (or mistype) data themselves.

If your business relies on a combination of contractors and full-time personnel, tax software can automatically provide each employee with the specific form needed. More advanced tools help find federal work opportunity tax credits or other enterprise zone credits by analyzing a candidate’s job application, then securing and applying those credits on a client’s behalf. This not only reduces, but may also eliminate, their federal tax liability with dollar-to-dollar reductions, not deductions.

No two businesses are alike, but I’ve worked with enough to know all of them benefit from automated tax management.

What Should HR Do to Understand New Rules?

Knowledge and proactivity pay off in tax compliance. New federal, state, and local laws can be introduced each year, while tax rates and wage limits tied to preexisting legislation such as the State Unemployment Tax Act can shift annually. A change in a single state’s law could dictate entirely different deadlines, payroll schedules, reporting requirements, and more.

Make a habit of consulting the tax authority in each state where your business operates. This applies to long-standing federal laws, too. Certain statutes change without being codified, so paying attention is key. Compliance isn’t a switch to flip on when it’s convenient; it must be part of HR’s routine.

Payroll tax management software also helps employers stay on top of emerging and current laws. More advanced tools can report taxes to federal, state, and local agencies in the legally required formats on an employer’s behalf.

While tech supports strong tax compliance, it doesn’t replace agile, prepared, and knowledgeable HR professionals. Each needs the other.

How Do Businesses Find the Right Tech?

Few things hurt more as a leader than wasted opportunities. Yet nearly nine in 10 executives agreed the tech they’ve purchased isn’t fully used by their staff, according to a Pollfish survey of 800 US executives commissioned by Paycom.

What your business requires from its tax management software is unique. Regardless of those needs, your HR tech should allow employees to support your compliance strategy because they know their own information better than anyone.

Look for an option that lets them manage their HR data easily in a single software. It’s even better when it directly connects them to not only their taxes, but also payroll, time tracking, benefits, and every other piece of their work life from the moment they apply for the job. Consolidating and automating these processes creates consistency and eliminates data reentry, which are priceless for a solid compliance strategy.

Ultimately, with the right HR tech provider, tax management doesn’t have to be taxing.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Craig Boelte is chief financial officer of Paycom.

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