Posted on January 5, 2023 | All
Keeping up with the tax updates in HRMS/Payroll systems
Human Resource Management System is a software tool that helps businesses manage their workforce’s records, payrolls, incentives, and benefits. HRMS prepares tax returns, complies with tax updates, and tracks employee incomes to deductions and allowances. Every transaction has an element of tax attached to it, and the HRMS assists in preventing mistakes that can result in tax underpayment or overpayment.
Direct tax compliance and complications
Any taxation bracket applied directly to your employees and business transactions, like income and goods tax, comes under direct taxes. Two strategies are used to process the data that falls in this bucket:
Data sensitization is about protecting sensitive tax information from unauthorized users, access, or disclosure. Sensitization includes rolling out policies and cadences on how much your employees expose critical data to the public without intending it. Encryption, monitoring, and auditing are reliable measures for handling sensitive data. These measures help mitigate the risks of damaging your company’s reputation and directly impacting your finances.
Ensure your calculation systems can match the proper taxes from paychecks around the tax reforms and updates rolled out in each iteration. New versions can have a fresh set of tax benefits, minor changes in the slab rates, or exemptions. The HRMS needs a collaborative approach from the HR, and IT teams to keep the system compliant and practical. New employees are recruited around the year, but the taxes are filled only at the end of the fiscal year. Provide the context of the employee’s payment history and track the amount allocated to avoid disparities between the two salaries withdrawn.
Payrolls and tax forms- W2, 1049, and F941
Configuring and updating your payrolls requires you to keep up with the latest updates in each tax form your employees are responsible for filling. A W2 Form is a tax form that reports an employee’s wages and taxes withheld in a fiscal year in the US Payroll. Likewise, the 1049 tax form in US Payroll reports interest income earned by a particular employee or a business. Employers use F941 or form 941 in the Canadian Payroll to report federal tax liabilities and taxes withheld from paychecks.
Any changes across the three forms will need a revamped calculation of tax algorithms, changes in employee information, and updating new information in the new fields introduced through the update. By providing US and Canadian expertise during ERP updates, CI Global helps you address concerns and provide the information the end user needs to understand and comply with the changes.
Effective tax rate and risk minimalization
Regularly reviewing the HRMS calculations helps keep a tab on tracking employee income and compliance with the relevant regulations. Implementing safety nets and safeguards against unauthorized access to tax-sensitive information is key to minimizing risks. Automate the process of preparing tax returns through an HRMS that helps you stay updated with the latest deadlines and other requirements. Work closely with people who can help you through their expertise in creating a seamless tax calculating portal in your ERP.
How can CIG help?
Looking at tax compliance against the race of time? Fret not; CIG brings more than 16 years of experience in the HRMS and Payroll domain within the software development field to your table. Boost your teams’ potential and get the support that helps you deliver your best. Ideate around concepts that will impress your clients with innovative solutions that make a difference. Want to know more? Click here.