Dos and Don’ts for Communicating with Employees on the New Tax Law
Dan Moore
Companies are scrambling to understand and respond to changes in the new tax law effective in 2018. Employers may want to adjust a number of programs affected by tax changes, such as their qualified transportation fringe benefits, employee achievement awards, paid leave programs, expense reimbursement policies, executive pay and broader bonus programs, and more. Implementation could include updates to plan documents and changes in the payroll system. But what about employee communications?
Clearly, employers that are sharing tax savings with employees in some way will want to communicate the good news. For example, AT&T announced a holiday bonus, and Aflac, an increase in their 401k match. Beyond those types of communications, employers will need to let employees know about specific changes in company policies that are affected. But it’s better to steer clear of commenting on the general changes to tax rates – like with a generic “here’s what the tax law means for you” communication -- so as to avoid the appearance of providing tax advice.
One question employers may want to address with employees is regarding income tax withholding in an individual’s paycheck and whether or not that will change. Late last month, the IRS said it will be updating withholding guidance for 2018 and will encourage employers and payroll providers to implement the changes in February. The good news is the IRS says the guidance will be designed to adjust withholding based on employees’ current W-4 filings so employees won’t need to take any action to have their withholding adjusted to align with the new tax law. Employers may want to wait for the formal IRS guidance, expected this month, before crafting employee communications.