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Tax time-Important employees are educated on the new W-4

Tax time – It’s important employees are educated on the new W-4

March 6, 2020

With all the rushing around to complete their taxes, employees may not be aware of the new W-4 form which could affect their taxes, if not this year, potentially next year.

Employees becoming more educated on the new W-4 form will provide another way to help ensure that they get the most out of their taxes. The new form eliminates the “personal exemption” component of calculating taxes for the employee and instead, calculates taxes based on answers to a few personal questions. Only new employees in 2020 will be required to fill out the redesigned form, which was released in early December 2019. Even though current employees are not required to fill out the new form, the new tax calculations could change whether or not they owe taxes when they file in 2021, depending on whether their withholding status changes.

IRS has pointed out that because of the tax reform law in 2018, last year there were people who owed money and weren’t expecting that – not completing the new W-4 could potentially create the same situation for these employees again during the next tax season. Even though the IRS has stated that the new W-4 form is more streamlined, many employees and their employer are not sure how to interpret the changes. Employees are encouraged to consult their legal tax adviser to check on how it affects their individual tax situation.

Essentially, the IRS has said that the new form will make it easier for employees to adjust their wages and claim qualifying tax credits to get a more accurate determination of their income tax withholding. With some tax experts, the jury is still out on if this will actually be the case. Payroll industry experts were consulted by the IRS when designing the new W-4 to make it as easy to understand as possible. There are a few things employers should know about the new form in order to better communicate its benefits to their employees.

First, the whole idea of personal exemptions was suspended which potentially increases the child tax credit and makes it available for more people. In addition, the standard deduction was greatly increased for everybody, which could mean that more people are going to take it instead of itemizing.

Every taxpayer who claims a child dependent will receive a maximum tax credit of $2,000 per child under the new form. The previous W-4 form calculated taxes based on the number of allowances claimed, so employees who don’t file a new W-4 may not receive the full benefit of the updated tax credit if they qualify. The IRS recommends that employees check with their legal tax adviser for assistance on checking on their withholdings every year.

In early 2020, the IRS launched its upgraded Tax Withholding Estimator , a calculator to help employees determine how much to withhold from their taxes. The tool addresses issues like changes in income, withholding status and multiple jobs. The calculator provides information to help employees fill out the new W-4. Employers are encouraged to share this information regarding the new W-4 form and the tax calculator tool above with their employees.

Having your employees understand the forms they are required to fill out & making it easy to fill them out & make changes periodically is important not only during the on-boarding stage but throughout their employment. It will ultimately reinforce their decision and confidence that made you their employer of choice. We work with our clients to incorporate this. Let’s start a conversation today to solidify this type of confidence with your employees.

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor if different, the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.

This publication is posted on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

Help Employees Minimize Health Costs – Starting from $0 with a new annual plan deductible

January 31, 2020

For many people, January is a fresh new beginning. In the health insurance world, it is the well-known “reset button” on meeting your health plan’s annual deductible. Given that the majority of Americans live paycheck to paycheck, and a growing number are enrolled in high-deductible plans, the stress of meeting deductibles is very real. So we thought it would be a good time to share some helpful ideas that could help employees better manage out-of-pocket expenses.

  1. Provide and overview of the health care services that are available at no cost or a lower cost than an office visit. For example, suggest that employees:
  • Try telemedicine. This cost-efficient benefit is often offered as a value add to their existing health plan. The cost of a telemedicine visit is usually around $40-$50, and can be scheduled at your convenience via phone or video chat.
  • Consult with a nurse for free by calling the nurse-line of your health plan for consultation before scheduling an appointment with a physician; it could save you the cost of an office visit.
  • Take advantage of preventive services covered at 100%. For example, get a flu shot so you are less likely to get sick.
  • Consider a “convenience care” clinic located in stores like CVS, Target, or Walgreens. They offer a limited number of services at a lower cost that urgent care or a physician office visit.
  • Use in-network providers for the lowest possible out-of-pocket costs. If you need to see a specialist, ask for an in-network referral.

2. Offer tips to manage prescriptions drug costs:

  • When your doctor recommends a prescription drug, take the informed consumer approach and asks how much it costs and if there is an over-the-counter or generic option. Use prescriptions tools that are no cost to you like GoodRx that offers coupons and checks the nearest pharmacies to your location for the best price.
  • If a newly prescribed drug is very expensive and does not have a generic option available, ask whether you could have a smaller number of pills at first to be sure it works. Also, ask the pharmacy if there are patient assistance programs to help defray the cost.

3. Promote the use of transparency tools

  • A variety of tools exist to encourage healthcare consumers to shop around for services and tests. Check with your insurance company if you are not familiar with their transparency tool or need a refresher.
  • This is the perfect time to remind employees about tools that help them find out the cost of services. Promote the tools by providing examples and training opportunities.

4. A few new ideas. If you don’t have these financial management tools in place today, it would be worth investigating them for next year to help with the January out-of-pocket medical expense panic:

  • Some HSA vendors will advance reimbursement for medical bills based on amount committed from paycheck for the year.
  • Some EOB (Explanation of Benefits) aggregators will pay the amount due to the provider and assist the employee with a payment plan interest free.

Given that financial issues is a top stressor for individuals, anything you can do to help alleviate the burden of health care costs will contribute to a more productive employee and that is a real plus for your company. Contact us to discuss how we can pro-actively address this for your employees !

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor if different, the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.

This publication is posted on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.