As new guidance comes down monthly for IRS reporting requirements, and employees will have to file with their tax return for the first time, HR departments need help. There are ways they can overcome the challenges, but a broker may be their best asset. Kim Buckey, DirectPath’s VP of compliance communications, discusses how to prepare for these changes.
EBA: Why are there so many new compliance challenges this year?
Buckey: This is the government we are dealing with. This is a relatively new regulation. They are still working out the kinks. This year we are simultaneously dealing with the aftereffects of the first full year of the reporting, trying to work out the kinks from that process, while preparing for next year’s reporting. Because this is a relatively new regulation, the government is taking steps back periodically to see where they can improve and what needs to change. We are getting new guidance on a monthly basis. We are getting proposed forms and instructions … it is a lot of moving parts.
EBA: How can employers plan when everything is changing?
Buckey: Divide and conquer. Perhaps realize that you can’t do everything yourself. You may need to completely outsource the process or bring in outside help for some, if not, all of the various elements. You may ask your broker or counsel to be tracking what the changing regulations are. You may pull in an outside firm to do your data consolidation and testing. Just realizing that some things do need to be done by certain times of year. You can look back over the past year and see where you were late and where you were in good shape.
EBA: How can employers overcome 2017 compliance challenges?
Buckey: Monitoring changes from the IRS. Early last month, the updated forms for 2017 were released and about a week ago, the updated instructions were released in draft. Getting a hold of those, reading them, getting comfortable and understanding what is different from last year. We just got guidance on opt-out credits. We just got guidance on tax ID numbers. So, reading up as much as you can now to get familiar with things that will be impacting your reporting later in the year.
If you are not already, start gathering data now about eligibility and affordability. You are going to need to be tracking who is full-time, who is part-time, and who is terminating during the year, where there has been a change of status. You don’t want to wait until the end of the year and trying to lookback.
Generating test statements with partial year data so you can identify any red flags or potential problems. Also, make sure you have a process in place to distribute the documents on a timely basis; it is unlikely we are going to get another extension.
Finally, keep in mind to educate employees and a broker can provide some assistance, not only a reminder of what these forms are, but emphasizing this year you are going to have to submit it with your tax return and address the question on why your employer is bring such a nag abut tax IDs.
EBA: What role does a broker/adviser play in helping their client with compliance?
Buckey: They are a couple areas. Based on the fact that they are working with so many different organizations, they have a broader prospective and can provide best practices or most common practices to their client. ‘Here is what everyone else is doing.’ Or conversely, ‘Here is what you shouldn’t be doing, because other clients have had problems in this area.’
Brokers can also help identify partners. We talked earlier about not doing this all yourself and outsourcing. Brokers have a broader industry prospective; they know who is having success with this and who is struggling with this. Who the good partners might be.
