small business payroll planning

Post-Tax Season Payroll Tips for Small Businesses and Startups

Streamline payroll for your small business payroll planning with recordkeeping tips, payroll software solutions, and proactive tax strategies for next year.

Stefana Zaric
Written by Stefana Zaric
April 15, 2024
Contents
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Key takeaways

  1. Tax season can be a whirlwind for businesses, but it also presents a valuable opportunity to assess your payroll process and introduce any necessary changes.
  2. Post-tax season optimization strategies can involve applying any recently updated tax laws, enhancing your compensation packages, and considering payroll software or outsourcing providers.
  3. Through automated workflows, in-house expertise, and airtight compliance, Deel’s US Payroll and PEO solutions enable US businesses to better manage payroll, tax reporting, and more.

Peak tax season is over, and you’re feeling relieved until you look back at your spreadsheets, documents, and records.

You may have identified a few process inefficiencies that led to data errors you needed to fix at the last minute. Or a number of recently changed tax laws that you need to apply to your calculations before the next tax deadline to ensure compliance. Speaking of calculations—there might be room for changes in your compensation strategy and an opportunity to offer more incentives to your workers.

The post-tax season is ideal for tackling these questions and challenges, preparing you for the next round of filings, deductions, and returns.

Below, we’re sharing some best practices for improving your payroll process after the tax season rush.

Evaluate the current payroll process

Inefficiencies in your payroll and tax filing processes can become painfully evident during the busy tax season.

This is why, once the deadlines are behind you, you should use the quiet period to evaluate your current payroll management process and identify potential solutions for improvement.

Conduct a payroll audit in a few simple steps to answer these questions and get a realistic image of your payroll and tax management process:

  • Define the scope and timeline: Decide on the scope and timeframe for your audit—ideally, you will audit an entire tax year and do this soon after the tax season to make enough time until the next one to prepare properly
  • Collect essential documents: For example, employee W-2s and W-4s, timesheets, payroll reports, and bank statements for the chosen timeframe, making sure all documents are well-organized and accessible for review
  • Analyze key payroll metrics: Metrics like time to process payroll, error rate, and even employee satisfaction can reveal a lot about the efficiency of your system
  • Verify tax calculations and deductions: These need to match employee W-4 information and current tax laws
  • Double-check time and attendance records: Ensure these are accurate and reflect actual hours worked (including overtime)
  • Review compliance matters: Your payroll process needs to adhere to government regulations regarding payroll tax reporting and deadlines while protecting sensitive data
  • Document your findings: Summarize your audit results, highlighting any areas for improvement, including specific recommendations for corrective actions or process changes

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The two crucial goals of this audit are to:

Identify bottlenecks in the process

  • Were you and your team scrambling to collect missing data to file the taxes?
  • Did you have trouble determining which tax forms you need for different types of workers or which tax laws apply?
  • Did you struggle with repetitive, manual tasks that caused delays in payroll processing?

Assess process accuracy and security

    • Did you encounter any errors or discrepancies in payroll data during tax preparation?
    • How did you collect, share, and store sensitive documents and data?
    • Do you have strong data security measures in place to prevent breaches?

Now when you understand what went well and what could have gone better, you can plan appropriate steps to improve the process.

Deel’s comprehensive Reporting feature allows you to generate seven primary types of reports:

  • Finance reports
  • Benefits reports
  • People reports
  • Payroll reports
  • Contracts reports
  • Productivity reports
  • Time Off reports

Thanks to these reports, you can get a detailed overview of your costs on a global and regional level, including payroll summary and employee contributions and deductions, to understand exactly where you can make adjustments to optimize the payroll process.

Payroll report taxes and social security

 

Review and apply any federal and state tax changes

Tax laws aren't static, and staying informed can sometimes feel like chasing a moving target. Especially if you have US team members across different states.

Here are a few potential tax law changes to look out for because they can affect your payroll:

  • Adjusted tax brackets (changes in tax brackets may impact employee withholding amounts)
  • Modified deductions and credits (updated deductions or credits could influence employee tax calculations)
  • Employer tax rate shifts (employer-side tax contributions might be subject to revisions)

Note: The IRS typically announces annual inflation-related tax relief toward the end of the year. For tax year 2024, there’s an inflation adjustment for more than 60 tax provisions.

💡 Read more: Payroll Compliance Checklist and Tax Law Guide for 2024

To make sure you stay informed and never miss an important tax-related update, you can sign up for alerts from the IRS or state tax authorities.

However, tracking tax laws for 50 states can still be overwhelming as your team grows and payroll gets more complex. Partnering with payroll services like Deel can keep you updated without you lifting a finger, as all the changes are reflected in the platform.

Deel’s Compliance Hub provides:

  • Monthly “Workforce Insights” updates are delivered to your inbox and available in the platform
  • Compliance Monitor, which automatically scans, collects, and explains the latest relevant regulatory changes globally
  • AI-powered worker classification tool created based on award-winning research to mitigate compliance risks

compliance-hub

What else can you do to avoid missing any tax deadlines in the future? The post-tax season is ideal for setting reminders for upcoming due dates.

  • Create a payroll calendar: Clearly outline important due dates for federal and state tax filings
  • Set reminders: Use calendar alerts or internal notifications to remind you about specific due dates timely
  • Schedule reviews: Review your calendar quarterly or bi-annually—if possible, with your payroll provider or a tax professional

📖 Read more: US Payroll Taxes: Your State-by-State Guide

Re-think employee benefits and incentives

If you take your time to optimize the costs of running payroll for your US team, you may discover that some of the budget can be redirected to move attractive employee benefits and incentives.

The first step is to review payroll data to assess the cost-effectiveness of current benefits. Are certain options underutilized? Can you negotiate better rates with providers?

The insights gleaned from payroll data can be a springboard for boosting employee satisfaction and retention.

Here’s an example.

How many of your team members:

  • Have used their health insurance premiums?
  • Are working parents struggling to find good childcare options?
  • Are still paying off their student loans?

Analyzing this data can help identify areas where benefits fall short—e.g., you’re not providing childcare support or are offering generous learning budgets that are not being used.

Combined with the feedback from your employees, payroll data can help target specific incentives that your workers will actually use and appreciate, based on their individual needs.

A well-planned payroll system can also facilitate a more attractive compensation package through:

  • Streamlined benefits administration: Integrate benefits enrollment and deductions directly into payroll, saving time for both employees and HR
  • Flexible pay options: Offer options like pre-tax deductions for health savings accounts (HSAs) or dependent care accounts, allowing employees to optimize their take-home pay
  • Tax-advantaged savings: Promote employee participation in HSAs or retirement savings plans. Payroll systems can automate deductions and contributions, simplifying the process. Tax advantages of these plans can lead to significant savings for employees and potentially reduce your company's overall tax burden

Optimize your forecasting and budgeting

The data generated from your most recent tax filing is a goldmine for future financial planning, as it sheds light on your actual payroll expenses, including:

  • Overtime costs: Analyze overtime trends throughout the year to identify seasonal spikes or departments prone to higher overtime usage
  • Bonuses issued: Review the total amount and distribution of bonuses to anticipate future bonus payouts and their impact on payroll
  • Tax liabilities: Tax season provides a clear picture of your actual tax obligations, which is invaluable for estimating future tax liabilities
  • Garnishment payments: If your company withholds any court-ordered garnishments from employee paychecks (such as child support or wage garnishments), analyze the total amount withheld during the tax year
  • Recruitment and training costs: While not directly payroll expenses, tax filings may reveal deductions or credits related to employee recruitment and training
  • Payroll processing fees: If you outsource payroll processing, review the total fees paid to your payroll provider during the tax year

Note: This data can be used to benchmark costs and potentially negotiate better rates for future services or look for another vendor that can provide a better deal.

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By further analyzing this data, you can uncover valuable trends and patterns, such as seasonal fluctuations (periods throughout the year with higher or lower payroll expenses due to seasonal hiring, overtime, or bonuses), departmental spending (some departments may be consistently exceeding or falling short of payroll budgets) and year-over-year changes (how your payroll expenses have changed compared to previous years).

Knowing this information helps predict future growth and allows for more targeted resource allocation.

Tax season data also helps you estimate future tax liabilities with greater accuracy. By analyzing previous tax filings, which you should do in between two tax season rushes, you can:

  • Project tax obligations using past data as a baseline to forecast future tax payments
  • Do contingency planning by setting aside a contingency fund in your budget to cover unexpected tax-related expenses or potential changes in tax laws
  • Refine payroll processes: Analyze payroll data to identify any inefficiencies or bottlenecks in your current payroll processes, potentially revealing opportunities to automate tasks, streamline workflows, or invest in new payroll software

Automated US tax filing with Deel

Deel automatically generates and takes care of filing tax documents with the respective tax authorities, usually the IRS and Social Security Administration. Our team then distributes W-2s to employees at year-end.

Assess your recordkeeping

Tax season may be over, but the importance of accurate recordkeeping remains constant, no matter where your employees reside.

Thorough and organized payroll records are the foundation for efficient payroll processing, ensuring compliance, streamlining audits, and making next year’s tax season a breeze.

Note: Although the IRS requires you to maintain tax records for three years, some states may have different tax laws: the requirement is four years in California and Arizona, five in Montana, etc.

Other than remaining compliant with your federal and state tax laws, what are some other benefits of keeping tax records? Well-organized records can:

  • Minimize errors and delays during payroll processing
  • Make demonstrating compliance with tax regulations and labor laws simple
  • Prepare you for the auditing process, saving time and potential headaches
  • Expedite tax preparation and filing for the upcoming season

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The strategy for organizing your records depends on your business size and preferences.

Digital vs. physical: Consider a digital storage system for most records (paystubs, timesheets) for easy retrieval and searchability. However, some essential documents (W-4s, signed contracts) might require physical storage for legal purposes.

💡 Deel ensures safe and easy documentation management in our all-in-one platform—for all contract types, compliance documents, tax forms, and more.

Secure storage: For both digital and physical records, prioritize security. Use password-protected systems for digital storage and ensure physical documents are kept in a locked filing cabinet or secure off-site location.

💡 Deel’s world-class security features, such as Okta Single-Sign-On and SOC2 security certification, ensure your data is 100% protected.

What payroll data should you keep record of?

  • Employee information: Names, addresses, Social Security numbers, and hire dates
  • Time and attendance: Hours worked, overtime calculations, and leave taken
  • Tax withholdings: Federal and state tax withholdings based on employee W-4 elections
  • Employee benefits: Details of employee benefits offered, contributions made, and deductions applied
  • Payment records: Employee's gross pay, net pay, deductions, and pay dates for each pay period
Consider outsourcing payroll functions

The post-tax season is the ideal moment to think about the potential benefits of outsourcing payroll functions.

For small businesses seeking efficiency in payroll processing, cost savings, reduced errors, and compliance benefits, investing in a payroll provider can come with a significant ROI:

  • Cost savings: Outsourcing can be surprisingly cost-effective, especially compared to hiring a dedicated in-house payroll specialist, as you’ll eliminate payroll software costs, training expenses, and potential penalties for errors
  • Reduced errors: Payroll providers stay up-to-date on complex tax regulations and have robust systems to minimize errors, saving you time, money, and potential headaches with tax authorities
  • Airtight compliance: Outsourcing providers ensure your payroll adheres to all current federal, state, and local tax regulations, freeing you to focus on core business activities with peace of mind
  • Streamlined processes: Payroll providers offer automated solutions, eliminating manual calculations and saving you valuable time and resources
  • Scalability: Outsourcing adapts to your business needs—as your company grows, your payroll provider can handle increasing employee numbers and changing tax regulations seamlessly

📖 See also: Optimize Payroll: 12 Benefits of Payroll Automation With Deel

Highly recommended and hassle-free payroll system. No more delays in payment, no need to be tech-savvy. There are advance salary options for emergency situations, organized tracking of payments and invoices, several payment options to choose from, perks, and insurance.

Steph Adelantar, Customer Support Specialist, Lunchbox Technologies

If you decide to partner with a vendor to ensure tax management efficiency and accuracy, take your time to evaluate your options and select the right payroll provider from the very beginning:

  • Features: Consider features like automated tax calculations, direct deposit options, and integrations with your other HR and accounting software
  • Customer reviews: Read online reviews and testimonials from other businesses to gauge the provider’s reliability and customer service
  • Customer support: Ensure the provider offers responsive and knowledgeable customer support to address any questions or concerns you may have
  • Customer success: dedicated customer success manager serves as a single point of contact streamlining the communication between you and the vendor and can also provide useful insights about your target market, industry, and hiring practices
  • Security: Choose a provider with robust security measures to safeguard your sensitive employee data

 

Ensure engagement and communication with employees

Adjustments based on the data you reveal during the audit may require changes to your payroll system—and you need your team on board. Here's how to help your employees build a sense of control over their finances and reduce any anxiety around the payment process.

Be upfront with employees about any payroll changes resulting from post-tax season adjustments. This could include modifications to tax withholdings, benefits packages, or payroll schedules.

To help the team understand why the changes happened, provide a clear explanation of the reasons behind the changes. This fosters trust and understanding among employees.

Other than transparent communication and open door for employees to share their concerns, consider offering educational resources or workshops to help employees understand how tax changes might affect their paychecks.

Bonus tip: Provide employees with self-service options through a payroll portal. This allows them to access paystubs, review their W-4 forms, and manage their own information electronically.

When employees feel informed and involved in the process, it fosters trust and improves overall morale, avoiding a drop in your team’s productivity levels. Also, by empowering employees with self-service options and educational resources, you can potentially decrease the number of support tickets related to payroll inquiries.

Run US payroll effortlessly with Deel

Tax season may have passed, but its impact lingers in the form of valuable data for small businesses.

By taking a proactive approach to analyzing this data and implementing strategic planning, you can set yourself up for a smoother and more financially secure year ahead.

Managing payroll, tax filings, and employee benefits can be a complex and time-consuming task for small businesses.

Deel’s Deel US Payroll and Deel PEO solutions can be your game-changer:

  • Set up payroll with just a few clicks
  • Automatically calculate local, state, and federal taxes
  • Pay employees accurately and timely in every state
  • Easily add bonuses and last-minute expenses
  • And more

Whether your company only hires in the US or expands into foreign markets, Deel can scale with you. Our in-house payroll advisors are experts in local jurisdictions in 100+ countries, and we regularly add new countries to our payroll operations.

Explore Deel’s solutions today and experience the peace of mind that comes with streamlined payroll management.

Deel makes growing remote and international teams effortless. Ready to get started?

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