Is July a good time to think about employee W-2 forms? Yes, absolutely.
Each year around tax time, we hear from a handful of clients who have employees who didn’t have enough (or any) withholding taxes taken from their pay checks. It could have been for a number of reasons such as: high exemption calculation from their W-4 form, low pay that didn’t trigger the tax tables, or a high number of pre-tax deductions.
By law, employees are to be provided on each pay date with a stub or other visual that shows them the calculation of the gross pay of their check, deductions, taxes, and net pay.
Many times, employees allow the entire year to go by without reviewing this information, and then they are surprised at tax time when taxes are owed. This causes a lot of anxiety that could have easily been avoided.
Now is a great time to review your payroll journal reports to see which employees may not have had withholding taken. It’s not a requirement, rather a gesture to check-in with them to ensure they realize the calculation of their pay. Imagine being the employee who didn’t realize taxes were at $0 for the year, and then finding out in time to make the correction – reducing their possible liability at tax time. Whew!
Written by: Tricia Petteys, Founder, EVP Franchise Operations