We’re in the middle of tax season now and April 15th is closing in fast. For many full-time employees, filing their taxes every year isn’t all that difficult. And it should be straightforward for employees earning all or most of their income through your company. However, value and trust can be added by working with employees to help them adjust and take advantage of changes the IRS is making this year. Conversations about financial wellness need to start somewhere, so why not take advantage of the opportunity tax season affords you?
At a minimum, talking about tax season with workers can lead to conversations about retirement savings plans such as IRAs or 401(k)s, as well as any other financial management benefits you offer. It’s an opportunity to engage with employees and perhaps inspire more of them to enroll in your financial wellness programs during your next enrollment period.
2020 Tax Season Changes
The IRS recently released its 2020 Form W-4, which, as promised, streamlines how employees make accurate income tax withholdings. The IRS now calls Form W-4 the Employee’s Withholding Certificate. Employees hired after January 1, 2020 are required to use this form, while everyone else must use the new certificate when adjusting their withholdings. For those making no changes, employers will make the withholdings calculations based on the older version of the form those workers previously submitted.
The change is relatively straightforward, but HR personnel should be ready to assist employees with any questions they may have. Though the change is meant to simplify the process, we all know that skepticism, resistance and confusion often accompany change.
Tax Education and Financial Wellness
Most people don’t want to sort through their finances and taxes every year. They simply want to send in their returns and be done (and, maybe, receive a refund check). But tax season is the perfect time for employers and HR to educate workers about the advantages of adjusting withholdings and properly managing tax-savings or retirement accounts. It’s a complicated (and often dull) business that leads too many to dismiss those advantages entirely.
Some avoid the complexity of tax-savings accounts, for example, because they don’t want to be bogged down by the confusing paperwork every year. Or because they think they have to hire an accountant or tax preparer they can’t afford. Make it HR’s business to fold finance-related guidance into your financial wellness communications strategy. With engaging media as well as tax and finance experts available to help answer questions, employees will become more comfortable and confident with their financial situation and planning. It’ll help relieve some of their stress and improve productivity, too. After all, personal financial worries are a proven strain on both.
Making Better Use of Common Financial Tools
Tax-saving accounts include health savings accounts (HSAs) that provide an untaxable reservoir of money for medical expenses. These can have a large impact on an employee’s tax return. HR experts and benefits brokers are familiar with these accounts; not all employees are. Workers may associate them with annual benefits enrollment but, even in that context, they won’t necessarily understand how they work.
It’s on HR and company leadership to effectively communicate and educate employees about the usefulness of these accounts. American workplaces are underusing these useful tools, and workers’ bank accounts are ultimately paying the price. HSAs are one of the most underused financial tools available, particularly for young people. Even those who have them can probably use a few tips for how to use them more effectively.
In addition to a user-friendly experience and results that provide a value comparison, our PLANselect® benefits decision-support tool includes an HSA-contribution calculator. HSAdvantage helps employees decide how much to contribute to their HSAs on a per-paycheck basis. It also assists in determining their savings during tax season.
Make sure your employees are getting everything they need to improve their financial wellness with targeted, educational communications and programs.