Are You Tracking Your Tax Adjustments?
Tracking your tax adjustments can help you during tax reconciliation for quarter/year-end and quickly validate if any refund checks you received from the agency are actually owed to you. This can also better prepare your payroll department, should the event arise if a team member decides to move on to another opportunity outside your company. Tracking your tax adjustments keeps you better prepared for any tax related questions that should come up and alleviate a lot of research time to resolve any issues. Reducing your research time helps your company remain compliant in response time to the agencies and work internally more efficiently.
As a best practice, if any adjustments need to be made to an employee record, you should run all details of wages, tax liabilities, and pay summaries of the pay date(s) and quarter(s) impacted before processing the adjustment. You want to have a snap shot to compare to once the adjustment has been completed. Once the employee’s record has been adjusted, you will want to run the same reports afterwards, to validate that your adjustment has been done correctly. It is important to save these documents as backup. Please reference the IRS Retention requirements to ensure of the length to keep payroll documents on file. Note: your company may already have a retention policy in place that is compliant with the IRS requirements..