Infographic: Payroll Departments Tackle Multitude of Taxes, Increasingly Complex Requirements

Author: Rena Pirsos, XpertHR Legal Editor

February 12, 2014

This infographic illustrates the dramatic increase in the complexity of the US income tax system over the past century, highlighting the evolution of the employer into the nation's central tax collector. Employers must spend countless hours ensuring their compliance with the income and employment tax laws. In addition, employees spend about one-quarter of each year working to pay their tax bills. Now more than ever HR managers need to understand all the issues involved in payroll tax law compliance in order to effectively oversee and manage payroll operations.

HR is becoming a one-stop shop for managing a broad range of employment-related issues, including administering benefits, facilitating the collection of child support from noncustodial parents, and handling pay-related questions. However, tax compliance represents a crucial function of payroll operations included with an HR department.

When payroll is part of an employer's HR department, the HR manager is ultimately responsible for ensuring the employer's compliance with federal, state and local income and employment tax laws and regulations (i.e., those pertaining to Social Security and Medicare taxes, and taxes for unemployment, disability and workers' compensation insurance). This involves overseeing the work of payroll administrators and professionals who perform a wide variety of tasks, including:

• Preparing paychecks, which involves calculating employees' gross salary and the amounts to be deducted and withheld from those earnings for federal, state and local taxes; various health and welfare benefits; and for involuntary and voluntary payroll deductions.
• Determining the proper method(s) for paying employees (i.e., direct deposit, paper checks or payroll debit cards), based on federal and state wage payment laws.
• Periodic depositing and reporting of amounts withheld with various government agencies.
• Recordkeeping and document retention.
• New hire reporting to state agencies.
• Selecting, implementing and managing automated payroll systems.