An HR Guide To Employment Taxes

An HR Guide To Employment Taxes

Owning a company doesn't exempt you from tax payments. As the company human resource (HR) officer, you're responsible for paying and reporting the state and federal taxes of your business and the employees. You should be disciplined with tax payments because the consequences of not paying them can bring your business to closure, result in expensive interest on delayed payments, and a lien on your company bank account.


Keeping track of your taxes ensures you're following the tax laws, and it's also a civic duty. You're required to deposit taxes and submit reports quarterly. The following is a guide on employment taxes:   


What Are Employment Taxes

Employment taxes are the state taxes related to any taxable compensation of the company employees. It's the tax you pay on the wages and salaries of the employees.  The following are the types of employment taxes:


  • Payroll tax: This is the tax you pay for your employees to cover welfare programs like public safety and education. The amount varies depending on your territory or state, but you pay it to the government. It's also known as individual income tax.
  • Medicare: This is the tax paid for the public health program. It’s 2% of the taxable income apart from the income tax.
  • Superannuation: This is the amount of tax you withhold from your employee as tax to fund their retirement financial support package. It's taken in every payroll cycle and applies to everyone above 18 years old. 
  • Fringe benefits: These are taxes you pay depending on the perks your employees get, including education-related reimbursements, gym memberships, or employee discounts on loans. 


As the HR, you should know the ins and outs of the above employment taxes to ensure complete and adequate tax filing and reporting.


Tax Withholding Explained


Tax withholding is the amount of money you have to withdraw from the employee paychecks each month as income tax. The amount varies from one individual to another, depending on their gross salary and any additional information an employee gives during their onboarding. 


According to the law, you must withhold employment taxes from all your employees and file them. To be efficient in your tax withholdings, you can utilise the following techniques:


  • Use pay-as-you-go (PAYG) withholding: Perhaps you're wondering, what is PAYG withholding. It's where you withhold all the income taxes of your employees, and you make the payment on their behalf to ensure they don't default. The benefit of the PAYG system is that it combines the withholding tax obligations and installments in one system, making the payment dates one and on a single form.


  • Understand the tax parameters: The employees will ask you for advice on base withholding amounts, wage thresholds, and other data they need to complete their W-4s. Ensure you have all your information to help them out but refrain from advising them on their W-4 responses.


  • Have an accountant: You need an accountant to help you review all the tax withholding information. They'll help you ensure the information is correct and up-to-date.


  • Buy a human resource information system: To make your work easier, you could buy a payroll system with an integrated human resource information system. It'll ease your HR roles, including the organisation of employment taxes.

As an HR, handling employment taxes may be challenging if you don't have the right tools. Those listed above will give you an excellent start. As a company, you may also consider outsourcing some of the HR-related responsibilities to a professional company that can handle the payroll taxes and many other activities.


HR Tax Responsibilities

Here's a list of payroll tax responsibilities that you must do:

  • You must pay the company payroll taxes at regular intervals and other taxes, such as Medicare
  • You should withhold all taxes from your employees, after which the law requires you to file the tax. Failure to pay results in a tax penalty
  • You should set aside the money meant for payroll taxes, known as trust fund taxes.
  • You're required by law to report the taxes owed to the tax agencies 
  • You should prepare a reconciliation of reports such as income statements, financial reports, or balance sheet.

The HR responsibility spreads far more than preparing paychecks and covers the abovementioned duties.


How To Avoid Tax Penalties

Managing the human resource in the business isn't your only duty as the HR but also ensuring taxes are done seamlessly and at a minimal cost. You must ensure the company doesn't suffer hefty fines for not paying taxes on time. If you do fall on the wrong side of the authorities however, then have a look for the best tax relief organizations in your area to see how they can help you out of the situation.  


Mistakes such as incorrect data entry are common in tax filing, and this may not be penalized. However, you should avoid those tax malpractices that make you appear to be intent on defrauding the tax agencies. To avoid payroll tax penalties, here's what you should do:


  • Even as you withhold the employee payroll taxes, ensure the company tax is also paid.
  • Be compliant with the payroll tax payment. Don't withhold and fail to pay.
  • The tax laws keep changing, and you must keep up with the local and state tax changes.
  • File your tax reports with the correct forms.
  • Consider enlisting the help of a professional payroll service provider.
  • Have an accurate employee classification.


You must curve time in your busy HR schedule to collect, pay, and account for payroll taxes. This will save the company huge amounts of tax penalties. The following errors will cost you:


  • Failure to collect payroll taxes at all
  • Not sending the withholding you have to the authorities
  • Making the same tax mistakes severally
  • Continuously missing the filing and payment deadlines

You should be cautious to avoid paying fines for these. 



You must be diligent in tax filing and reporting on behalf of your business. Tax remitting, filing, and withholding can be overwhelming. But with proper understanding and the use of appropriate tools and personnel, tax filing is doable. Start mobilising the requisite resources now and streamline your tax filing process. Make use of this guide to stay away from taxation woes that can cost you money or even your business.

Patson Chidari
This article was written by Patson a Consultant at Industrial Psychology Consultants (Pvt) Ltd

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