Recent storms and flooding in Louisiana remind us that as we head into the heart of hurricane season, employers should prepare for disasters before they occur. Payroll professionals should take steps now to ensure that employees are paid and tax obligations are met in the case of an emergency.
A payroll plan should include document process workflows, including accessing employee data, time collection and communication with banks, government agencies and vendors, consultant Deborah Ellis Timberlake said in a Bloomberg BNA white paper. The plan should also assess the risks and penalties if the payroll department does not meet obligations, she said.
Plans should organize payroll functions into three categories: inputs, processes and outputs. Timberlake and Brent Gow, Starbucks Coffee Co. global payroll director, said at the American Payroll Association annual conference in May. Gow is a member of Bloomberg BNA's Payroll Library Advisory Board.
Inputs should include employee income and deduction records, pay adjustments, time data and tax records, Timberlake and Gow said. Processes include validating payroll data, processing bank transfers, calculating gross-to-net and generating tax deposits and filings. Outputs may encompass paychecks, third-party payments, reconciliations, tax returns and payments, they said.
Identifying and communicating with third-party vendors is important because it is possible for a vendor to be affected by a disaster that the employer is not, Timberlake said in the white paper. During Hurricane Katrina in 2005, the payroll operations of an otherwise unaffected employer were jeopardized when the department’s supplier of paper checks shut down during the disaster, Timberlake said. Payroll professionals should plan ahead for that kind of possibility.
Departments also should plan ahead by backing up documentation and computer files in an offsite location, Timberlake and Gow said. Using cloud computing is one method of off-site storage, they said.
When a plan is in place communicating with other departments and testing it out are important to ensure a plans effectiveness, they said.
Tax Deadline Extensions
If a disaster occurs, payroll professionals should be aware of tax deadline extensions that could ease the burden of recovery.
Federal extensions are announced on the Internal Revenue Service website. If an employer’s location is not listed in the first announcement, it is important to monitor the development because additional locations often are added as the Federal Emergency Management Agency assesses damage.
Though states often follow the federal government’s extensions, this is not always the case. States may choose not to extend deadlines for the same time period as the IRS does or may offer extensions that the federal government does not.
In the case of the storms in Louisiana earlier this month, the state extended tax deadlines differently, depending on the type of tax. Withholding returns and remittances were extended to Nov. 30, though other taxes were extended to Jan. 17, 2017. By contrast, the IRS extended payment and filings due after Aug. 10 to Jan. 17, 2017, but limited the extension to employers in specific counties.
Employers should be aware that state and federal tax requirements may differ after an emergency in order to ensure compliance.
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Follow Caitlin Reilly on Twitter at @CaitEReilly
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