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Tax Preparation as an Employee Benefit
Employers don't necessarily need to pay for employees' tax prep support

By Joanne Sammer  2/12/2007
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2014 Update:
IRS and Free File Alliance Provide Tax Services

By SHRM Online staff

In educating employees about tax preparation options, here's something to keep in mind. The Free File Alliance, a coalition of tax software companies partnered with the Internal Revenue Service, announced on Jan. 17 the launch of the 2014 Free File program. Every taxpayer with a 2013 Adjusted Gross Income of $58,000 or less may visit to prepare, complete and e-file their federal tax returns at no cost.

Free File also offers basic federal e-filing services with no income limitations. This basic e-filing service, called Free File Fillable Forms, allows taxpayers who are familiar with tax law and need no preparation assistance to complete and file their federal income tax electronically. There are no income limitations to use Free File Fillable Forms, which will be available starting Jan. 31.

IRS Free File provides a list of Free File Alliance member companies and their free tax software offerings. Users may either choose the company that fits their needs or utilize the “help me find a company” tool. After selecting a company, users will be transferred to the company's website to prepare, complete and electronically file their federal income tax returns. The service is also available in Spanish.

The Free File Alliance is also partnered with the IRS Volunteer Income Tax Assistance Program (VITA)—a walk-in service for low-to-moderate income taxpayers. Free File software will be available at self-assist kiosks at VITA sites in 22 states and the District of Columbia. Through this partnership with VITA, the Free File Alliance will be able to provide preparation and e-filing services for taxpayers who do not have Internet access at home, as well as those who want to e-file, but need additional, in-person assistance.

Free File Alliance member companies have continually worked with the IRS to strengthen the Free File program, and taxpayers have consistently reported that it is user-friendly and efficient. Responding to a 2009 IRS survey, 96 percent of users said they found Free File easy to use, while 98 percent said they would recommend the program to others.

The story below, originally posted in 2007, was reviewed for accuracy and relevance in January 2014. Our conclusion: It remains timely information.

As the calendar wends its way toward April 15 each year, workers cant help but think about the inevitablethat is, confronting the often complex and time-consuming task of filling out their income tax returns. For some companies, tax preparation is a time to expand their employee benefit offerings, often with no direct cost to the employer. A growing number of employers are looking for ways to help employees with this annual chore by:

    • Providing space on-site to a tax prep service. 

    • Negotiating group discounts with providers. 

    • Subsidizing tax preparation services for employees. 

    • Linking employees with free tax preparation options in the community.

For example, local offices of tax preparation firms such as H&R Block or Jackson-Hewitt, among others, as well as CPA firms may schedule tax preparation services at an employer's worksite. And don't overlook business schools that may have tax-prep programs that can become a resource for employees.

Offering a Discount

Sprint Nextel Corp. has allotted H&R Block retail space in its Overland Park, Kan., headquarters since January 2002, according to Teena Shouse, the companys general manager of employee services. "This was a direct result of employee requests," she says. "We asked employees what services they wanted in the retail space that would help them to do a better job and be more productive, and tax preparation services was one of the requests."

The popularity of the service has grown since then. When H&R Block first moved into the retail space, it only occupied one cubicle. It has since expanded to four cubicles. Although including H&R Block in its retail space was more about making this service convenient for employees to use, the company has negotiated discounts of $15 for a tax return and $25 for first-time users.

Along with providing space on-site for the vendor,
Sprint Nextel negotiated employee discounts.

Out of the 15,000 employees at the headquarters campus, Shouse estimates, 250 to 350 employees use those services, and that number continues to grow each year. In 2007, the company allowed H&R Block to add an electronic kiosk on its campus that lets employees get answers to tax questions and obtain a voucher for the available discount on services.

Teaching Tax Prep

When employees approached Patty Briguglio, president of MMI Associates Inc., a marketing firm in Raleigh, N.C., to request an on-site class on tax preparation, she hired her own accountant to lead the class and review employees tax returns for accuracy after they had prepared them. All of the firms 16 employees participated and gave the class rave reviews.

The tax preparation class, which lasts about 75 minutes, focuses on explaining the information on a W-2 form, identifying what deductions people might be eligible for and answering questions.

"I plan to do this every year from now on," says Briguglio. She adds that the experience is worthwhile for her and her employees and fits in with her goal of providing unusual but appreciated perks and benefits to her staff.

"Most of our staff are single and young, so they dont have complex tax returns and they wouldn't have paid someone to do their tax returns without this program," she says. "They loved the class and, although I never thought to do this myself, it was worth it because the issue is important to my employees and they want to get every penny that is coming to them."

Going forward, Briguglio says classes will probably be more structured, and employees who have already been through one class are likely to be better prepared.

"We didn't know what to expect this year, but next year employees will have the information and returns from last year," she says. One thing she will not change is the class format itself, noting that this approach is much more cost effective than one-on-one meetings would be.

Briguglio recommends that employers survey employees to find out if they want and need tax preparation support. She noted that demographics play a major role in whether employees need tax preparation support because young and single people might not have much familiarity with tax returns or might not have an existing relationship with a tax preparer, while older employees might already have that type of experience or relationship.

Survey your employees to find out if they want
and need tax preparation support.

Identifying Free Resources

Employers don't necessarily have to spend money to help employees obtain tax preparation support. For instance, Aurora University, a private school in suburban Chicago, offers free federal and state tax preparation to its employees who earn up to $50,000 per year and to members of the local community who meet the income requirements. It does so through its Volunteer Income Tax Assistance program, a partnership between the IRS and Aurora University's Dunham School of Business.

Under the program, tax preparation services are provided by college students who have completed a required 10-week course. "This program has been available for several years," says Therese A. Hoehne, SPHR, the universitys HR director. "The university communicates with its employees via e-mail to remind them that the program is available, when and where."

Hoehne urges companies to:

    • Investigate whether programs are available through local universities that have a business school or offer degrees in management and accounting.

    • Vet the program to make sure it will meet employee needs.

For example, if the company has a large number of Spanish-speaking employees, it might look for programs that offer translation services or Spanish-speaking tax preparers, she says.

Choosing the Right Vendor

When choosing a vendor, Sprint Nextel's Shouse recommends, companies consider each vendors reputation, stability and flexibility in meeting the companys and employees needs. "It's less about price and more about having a tax preparer the employee can count on if he or she gets audited or has other tax-related issues," she says.

Choose a tax preparer that employees can count on
if they get audited.

In addition, because H&R Block has its location on Sprint Nextels campus, the company has closely monitored its operations to make sure employees are not waiting in line for service and that the tax preparers are appointment-driven and respectful of employees time. "Things come up during the workday, and employees often have to reschedule their appointments, so the provider has to be aware of and accommodating of that," Shouse says.

When Briguglio decided to offer the tax preparation class, she immediately chose her own accountant to handle it. "I probably wouldn't have done the class with someone off the street," she says. "I wanted to make sure there was quality information in this forum that employees would understand."

Joanne Sammer is a New Jersey-based business and financial writer. Her articles have appeared in a number of publications, including Business Finance , Consulting , Compliance Week and Treasury & Risk Management. 

Related SHRM Article:

Many Workers Don't Understand Their W-4s; Want Tax Prep Support, SHRM Online Benefits, May 2006   

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