The Importance of True Location Based Taxation



Calculate Location-Based Payroll Taxes Correctly

Whether you’re an employer or employee, every state is fighting for your tax withholdings. That’s why SyncHR helps organizations manage tax data so that you stay in payroll compliance, make the most of location-based taxes, and avoid the costly repercussions of inaccurate filings. 

There are five essential ways SyncHR assists organizations in mitigating tax compliance risks and managing payroll tax compliance.


1.  Calculating taxes based on location.

SyncHR calculates necessary taxes based on the exact work location. By exact, we’re referring to the longitude and latitude, not just the zip code. We do this because zip codes may provide a way for mail to be delivered; however, they aren’t as accurate when it comes to the exact location. An extreme example is zip code 85254. This number is assigned to Scottsdale, Arizona; yet, 85% of its territory is inside the city limits of the neighboring city, Phoenix. If there are different tax rates for those cities, the work location’s longitude and latitude will capture that difference. The zip code won’t.


2.   Updating data based on the effective date.

Most human capital management (HCM) systems process changes when the data enters the system, which may not be the same date that the change occurred. This creates an issue for many HR and payroll processes, including tax rates. For example, suppose an employee moves but doesn’t update their location until a few weeks later. In that case, their tax withholding rates may not be accurate, and their location-based employment taxes might be inaccurate as well. That’s one reason SyncHR uses effective dates to ensure that taxes are accurately assessed based on the date of any relevant location change.


3.  Setting up workflow automation for timely alerts.

When employee data changes occur, HR and payroll administrators can set up workflow automation to receive timely alerts. With this feature, administrators can check the records to confirm the accuracy and immediately address any questions or issues that might come up. 


4.  Managing workforce planning based on position.

In SyncHR, you can designate positions to specific locations. In other HCMs, you can’t set up position-based data in advance. Instead, you often have to create a new profile from scratch. This position-based feature enables an organization to pre-set location-based tax deductions. In that situation, the tax code is automatically applied based on the position’s location. The tax data associated with that position can be useful when making workforce planning projections and decisions related to potential tax costs. 


5.  Assigning work-from-home as a work location.  

Most HCMs offer the ability to assign every employee to a work location. Unlike other HCMs, SyncHR allows administrators to assign a work location — even if it’s a work-from-home location. Taxes will be calculated using that work-from-home address. With SyncHR, creating a new “work from home” location is as simple as checking a box. A completely new location doesn’t need to be created — once the box is checked, the system simply refers to that home address for any data that’s based on work location. 


What happens when HCM automation doesn’t exist?

Our sales team recently spoke with an HR leader who is looking for a new HCM for their organization. One reason that prompted this search was an issue that arose during Covid-19. When all of this organization’s employees began working from home during the pandemic, the HR team had to create a new business location for each and every home-based office. Imagine that scenario — with 50, 100 or 500 employees working from home — that’s a lot of new locations to manually add to the HCM! 

Of course, updating employee work locations is necessary to ensure accurate, compliant tax records. But entering each “new” location can require significant effort, may result in manual errors, and when an employee moves — or returns to an onsite work location — someone must update that data. The HR leader we spoke with agreed that during a global crisis such as the Covid-19 pandemic, quickly assigning a home-based work location would have been a huge time saver for their team, as well as their counterparts in payroll. 

Taxes are complicated, but they’re even more complex if your HCM is working against you. Don’t settle for a system that doesn’t have the features and capabilities you need. Instead, leverage a next-generation HCM system like SyncHR that puts the power of data and automation at your fingertips in a way that ensures you’re not only complying with tax regulations, but you’re managing tax data in a way that drives business results.

Contact a SyncHR solutions expert to learn more about how to replace hours of extra effort and costly tax errors with the accurate, up-to-date tax data you need.

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Liz Sheffield

Liz Sheffield

Liz Sheffield is a writer and communicator based in Seattle, WA. She specializes in writing about topics related to HR and the people side of the business. Her areas of interest include HR Tech, HCM, leadership, training and development, employee engagement, culture, and recognition. Sheffield brings more than a decade of corporate experience in HR.

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