There are some notable tax changes at the state and local levels for the 2018…
With two major natural disasters hitting the U.S. in a two-week span, employers are once again reminded of how important it is for their payroll departments to have a business continuity plan in place to keep them operating.
Of course, the imminent threat of a natural disaster should not be necessary to remind payroll departments that they need a business continuity plan. This is something that should already be in place and continuously reviewed. By doing so, payroll departments are better prepared when events such as Hurricanes Harvey and Irma occur.
What should be in your business continuity plan?
According to TechTarget, an online technology provider that specializes in targeted technical content, business continuity is a proactive process and encompasses the procedures business units must implement to ensure they can operate as close to normal as possible following either a natural disaster or major technological interruption.
TechTarget says that a business continuity plan acts as a comprehensive document, outlining the activities required for a business unit to operate, the risks associated with any interruptions, and the steps required to ensure business continuity in the event of a business interruption.
The plan should also include:
- Contact information for employees and external stakeholders
- Change management procedures
- Guidelines on when to use the plan
- A schedule for reviewing, testing and updating the plan
What do payroll departments need to consider?
When payroll departments are writing their business continuity plans, they must consider the activities that are unique to them – and which every employee in the company relies on.
This means payroll departments must review their payroll and tax report filing schedules, the submission and approval of employee timecards, and the processing of paychecks, to name a few. They should identify the individuals who are involved in all of the department’s activities in order to keep it running, and should note who works in company headquarters and who works in other locations. It’s important to note if there are individuals in one office who can access the information and carry out the same payroll activities if another office experiences a business unit interruption.
IRS assistance following natural disasters
While companies must do what they can to prepare for and mitigate the effects of a natural disaster on business operations, they can generally expect the IRS to step in and alleviate some of the pain in the event of a federally declared natural disaster or catastrophic event.
Generally, the IRS provides automatic filing and penalty relief to taxpayers with an address of record in designated disaster areas.
In the aftermath of Hurricane Harvey, the IRS extended the deadlines for businesses operating in 39 Texas counties to file tax returns and make payments to Jan. 31, 2018. The deadline extensions apply to payroll-related filing and payment deadlines that started Aug. 23, 2017.
Following Hurricane Irma, the IRS announced on Sept. 12 that it’s applying the same extensions to businesses operating in Florida and parts of the Caribbean, postponing various filing and payment deadlines that occurred starting Sept. 4, 2017, in Florida and Sept. 5, 2017, in Puerto Rico and the Virgin Islands.
The IRS plans to waive late-deposit penalties for federal payroll and excise-tax deposits that are normally due during the first 15 days of a disaster period. However, the postponement of time to file and pay does not apply to employment and excise tax deposits.
The IRS also said it plans to allow those affected by Hurricanes Harvey and Irma to take hardship distributions or borrow funds from retirement plans, and will waive a six-month ban on 401(k) and 403(b) contributions that typically applies after a hardship distribution.
Finally, in the event of a federally-declared disaster, Section 139 of the Internal Revenue Code permits employers to offer disaster-relief payment programs to employees that provide tax-free reimbursement. These payments can be used to offset various items related to the disaster, such as medical, temporary housing, and transportation expenses not covered by insurance plans. The payments can also be used to pay for repairs to homes or the replacement of its contents.