A Guide for Employee Tax Questions in 2021

Tax season is busy for employers on both a personal and professional level. With responsibilities that carry a heavy weight—including penalties if certain forms aren’t delivered to their respective parties on time—employers and HR teams need to make sure they have all their tax information organized and be available for any questions employees may have. From compliance matters to deadlines, this resource will help answer questions your employees may have about tax season.

What’s New With Tax Documentation This Year?

Even though HR teams and employers are no strangers to paperwork and documentation, the past year has complicated HR teams’ to-do lists in more ways than one. With all of the moving parts to maintaining compliance, employers can keep the following updates in mind this tax season:

1. New W-4 Form. The new 2021 Form W-4 remains relatively unchanged after a major overhaul in December 2019, but a few adjustments were made to the taxable wage & salary tables on page 4. For employers, this means that current employees won't face a learning curve when updating withholdings. However, employees who join your company in the new year may not be familiar with the new form.
2. 1095-C Deadline Extension. The 1095-C form is the government’s way of tracking whether or not required employers with 50 or more full-time equivalent employees are offering healthcare coverage to full-time employees. This year, the IRS extended the furnishing deadline to March 2, 2021, while the documents must be delivered by March 31, 2021 (if filing electronically). The paper filing deadline was Feb. 28, 2021.
3. Extension for Winter Storm Victims in Texas. The IRS announced that the deadline to file tax returns and make tax payments is extended for victims of the February winter storms in Texas. According to the IRS, the new deadline is June 15, 2021, and details can be found on the IRS website.

Tax Season FAQs for Employers

Like employers, employees have had a lot to handle in the past year and taxes might not be the first thing on their minds. With deadlines approaching, your teams might have last-minute questions about taxes and it’s important that you have answers. Here are some tax-related questions that employees might have:

1. When is the personal filing deadline this year? The IRS announced that the deadline for employees to file their income taxes has been extended from April 15 to May 17, 2021. As of right now, unless you’re a victim of the winter storms in Texas or receiving tax relief from other disasters indicated by the IRS, that deadline still stands.
2. Do I need to wait for certain forms to file my taxes? The main document that individuals need to complete their taxes includes their W-2 form(s). Employees will receive their W-2 form—or multiple W-2 forms if they had multiple jobs during the year—from their employers. If employees receive health insurance through their employer, they will also receive Form 1095-C, but it’s not necessary for filing taxes. Employees should have received their W-2 on or before Jan. 31, 2021. 
3. What is Form 1095-C and when do I get it? Employees will receive their 1095-C form on or before March 2, 2021. The Affordable Care Act (ACA) requires employers with 50 or more full-time equivalent employees to offer healthcare coverage to full-time employees or potentially face a fine. The 1095-C is the government’s way of tracking this. 
4. I’ve also heard of a 1094-C. Do I receive that form? No. Form 1094-C can be thought of as a cover sheet for all of an organization’s 1095-Cs and employers file the form only with the IRS. Therefore, this form isn’t distributed to employees at all.
5. I’ve heard that some people receive Forms 1095-A and 1095-B. What are those? 1095-As are distributed to people who received insurance through a federal or state marketplace. 1095-Bs are distributed to people who received insurance through small self-funded groups, employers who use the Small Business Health Options Program, or fully-insured employer-sponsored plans.
6. What if I’m missing a form? If an employee is missing a form, make sure the address on file that the form should’ve been sent to is correct and up-to-date. According to the IRS, “If they can't get the forms, they must still file their tax return on time. To avoid filing an incomplete or amended return, they may need to use Form 4852. If a taxpayer doesn't receive the missing or corrected form in time to file their tax return, they can estimate the wages or payments made to them, as well as any taxes withheld. Then use Form 4852 to report this information on their federal tax return.”

The following actionable tips can help employers maintain compliance and peace of mind when it comes to tax season:

1. Make sure you have a process for storing and retaining employees’ W-4s. The best way is storing W-4s online in an onboarding software like BerniePortal—not in a folder on your desktop.
2. Audit your employer contributions and other business taxes. Consult a tax professional if you have questions.
3. If you don’t have a process for employee tax-related questions, consider creating one and documenting it in your employee handbook. For example, here is the process from the BerniePortal Culture Guide, which is our employee handbook:
• Our payroll provider is responsible for tax deductions and withholds taxes based on the information employees provided in their W-4 during onboarding. 
• If employees would like to make changes to their W-4, they are advised to contact HR to unlock their BerniePortal account.
• Our payroll provider has tools available within employees’ personal accounts which will allow them to estimate the amount of taxes to be withheld from their paycheck. They are also advised to use the IRS Withholding Calculator to determine how much should be deducted from each paycheck.
4. Take some time to really look at how your company is handling its tax-related workflow. Are there bottlenecks in the process? Sometimes the workflow can be streamlined or improved upon by switching to an all-in-one HRIS like BerniePortal.