Employer Tax Withholding vs. Tax Filing

Published: January 5, 2023 by Rudy Mahanta, CPP

employer reviewing tax withholding

Your payroll teams are an integral part of your organization — responsible for delivering checks, ensuring compliance with tax laws, recording paperwork for new hires, managing existing employee files and more. With so many critical functions to oversee, these valuable team members need the proper support and resources to complete these processes efficiently and effectively. Organizations are in pursuit of a tax service provider that can adequately empower their payroll teams, but first, it’s fundamental to recognize and understand what kind of tax management help your department needs. For a better understanding of your organizational needs, we’re taking a closer look at the tax withholding and tax filing processes that payroll professionals typically manage.

What Is Employer Tax Withholding?

Tax withholding is a payroll process that involves taking the correct amount of tax out of an employee’s paycheck.

Withholding tax is a set amount of income that an employer withholds from an employee’s paycheck, paying it directly to the government in the employee’s name.

While this can be a time-consuming and arduous process for your teams to oversee, the money taken is a credit against the employee’s annual income tax bill. Ultimately, tax withholding is intended to ensure employees can comfortably pay the income tax that they owe — maintaining the pay-as-you-go tax collection system. After finances have been resolved, if too much money was withheld then an employee will receive a tax refund. On the other hand, an employee can be required to pay additional tax dues if not enough money was withheld.

Leveraging support from Experian Employer Services

Experian Employer Services is experienced in providing employer tax withholding services to help your payroll managers create a streamlined, simplified and stress-free payroll process. Solutions and resources from Experian Employer Services are designed to help organizations:

  • Stay up to date: The tax forms provided by Experian Employer Services are current with the latest changes in legislation to help you maintain compliance. This can be an incredibly difficult and meticulous aspect to manage, considering 60% of the 120+ federal, state and local forms typically need to be updated each year.
  • Ensure the proper tax forms are completed: We help ensure employees complete all the necessary federal, state and local tax forms—based on where an employee works and lives—to further promote compliance measurements.
  • Auto-apply requirements: Tax requirements can vary significantly — even from zip code to zip code. With Experian Employer Services you can auto-apply income tax to employees within a specific locality.

Employer tax withholding was already a burdensome process for payroll teams, however proper tax withholding has become significantly more difficult with the pandemic and the growth of remote working. This is quickly emphasizing the need for organizations to leverage sufficient support to navigate these processes successfully.

Defining Tax Filing — and Recognizing the Difference

A tax filing service, on the other hand, is a service that’s usually outsourced to a payroll vendor — such as ADP, Ceridian or UKG. These services are meant to guarantee that taxes are paid to the IRS and other government agencies on a timely basis, with the correct filing frequency.

Each government agency is responsible for a specific filing frequency based on the amount of tax due. Some of the most common filing frequencies include:

  • Next Day
  • Semi-Weekly
  • Monthly
  • Quarterly

Typically, state income taxes (SIT), state unemployment insurance (SUI) and local taxes are paid by vendors to the correct agencies. How does this work? Essentially, payroll applications, such as Workday, will send a file after each payroll to tell the tax filing vendor how much to pull and pay out of the client’s bank account — while accruing the amounts that will need to be paid based on the specified frequency.

Employers must file all applicable forms by their required due date — bearing in mind that if the due date falls on a weekend or legal holiday, then filing can be done on the next business day. Forms filed quarterly, including form 941, have due dates of April 30th, July 31st, October 31st and January 31st — for the fourth quarter of the previous calendar year. The reporting periods for quarterly filing include:

  • March 1 through March 31
  • June 1 through August 31
  • September 1 through November 30
  • December 1 through February 28 or 29

Forms filed annually have due dates of January 31 and February 28 — or March 31 for organizations filing electronically — depending on the employer’s applicable forms. Forms with deadlines in January are typically more common, which include W-2 forms, form 940, form 944 and more. The forms filed annually with required due dates in February include form 1099-MISC and form 8027.

While tax filing and tax withholding are clearly distinct processes that organizations must navigate, they both require great effort to manage a variety of unique deadlines and remain compliant along the way. Fortunately, organizations don’t have to undergo these challenges alone, and implementing improved systems for support can quickly help organizations improve and simplify their tax processes.

Elevate Your Tax Withholding and Filing Processes With the Right Support

Your payroll teams are essential, but the work involved in managing taxes and compliance can be intimidating and overwhelming. These professionals need tools, resources and support that can adequately empower them along the way — ultimately driving efficiency and better results.

Experian Employer Services provides the resources and reliable service that organizations need to streamline their tax processes with ease — serving as a dependable partner for employers across industries. With these solutions, you can simplify and ensure compliance, while mitigating the burden on your payroll managers. For Workday users, we offer a simplified method to manage local tax withholding.

Ready for more efficient and significantly simplified tax withholding and tax filing processes? Schedule a demo to get started.

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