You received a notification regarding a Tax Reconciliation and want to know what it is and what are the next steps.
What are Tax Reconciliations?
As each payroll is processed, we debit the required payroll taxes that apply—we then pay and file taxes and forms. If adjustments are made that affect the amount of taxes owed (after payrolls have already been processed, or forms filed), you may be liable to pay more to federal or state agencies.
To properly account for the changes and calculate tax differences, we run a “tax reconciliation” payroll to make sure the correct tax amounts have been paid and reported to each agency.
When these types of payrolls are processed, you may see that:
- We'll need to debit your company for tax amounts owed based on the updated information, or;
- We'll be crediting (refunding) your company for taxes that may have been overpaid (if we're still holding on to the funds).
What causes a Tax Reconciliation?
Some tax reconciliation payrolls happen automatically as a result of changes to your account, or on a quarterly basis (to correct potential tax discrepancies ahead of filing). Other times, they may be run by our team, as needed, as a response to one of the situations below.
- State unemployment rate change: This occurs when your State Unemployment Insurance (SUI) rate changes for the current quarter due to reasons specified by the state unemployment department.This debit typically happens at the end of the quarter.
- FUTA credit reduction states: This occurs if you're an employer in a credit reduction state, and a higher tax is due on federal Form 940. This debit typically happens at the end of the year.
- Payroll ran outside of GoCo Embedded Payroll: When you add or remove an external payroll, it may impact how previous payrolls should've been taxed. If additional taxes are owed, we'll debit your account and send the tax amounts to the applicable agencies.
- Work/home location changes: If your company or an employee has a change in work or home location, you may be liable to pay more to the federal and state agencies.
- Benefit adjustments: Changes to benefits can also change taxes owed.
- Exemptions: Adding or removing a tax exemption can result in an increase or decrease in taxes owed.
What happens if the Tax Reconciliation determines a difference?
When a reconciliation indicates that a credit is needed, we will issue a refund to your company for any taxes that may have been overpaid, provided we are still holding the funds.
When a balance is due as a result of a tax reconciliation, we will debit your company for tax amounts owed based on the updated information.
Prior to any debits you you will receive the following Notification:
For more information on GoCo Embedded Payroll Notifications and Communications you can check out Understanding GoCo's Embedded Payroll Communications: Critical & Non-Critical Alerts for Full Access Admins
For any additional questions, please reach out to us at help@goco.io 💚