Barry Goldwater said that “the income tax created more criminals than any other single act of government”, therefore, it is important for human resources to help their people to fill the tax without breaking the law. To do that, HR officers should first understand what employment tax really is.

What is an employment tax?

Employment tax is the taxes employer and employees must pay to federal, state, and local agencies. Inland Revenue Authority (IRA) Singapore stated that employment tax is differentiated by income (including salary, bonuses, director’s fees, commission, allowance, etc.) which is covered in administrative concession. 

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Meanwhile, according to global IRS, there are five types of employment taxes including federal income tax, social security and medicare taxes, additional medicare tax for wages that exceed the threshold amount to an employee, federal unemployment tax, and self-employment tax.

When to report employment tax?

Generally, employment tax should be reported between January and April of each year when taxpayers prepare financial statements and reports for the previous year and submit their tax returns. In each month, the due date should be filled with different reporting.

In Singapore, however, all taxpayers including sole-proprietaries and partners should file their income tax returns by April 15. Singaporean taxpayers can file their returns online via myTax Portal or by mail and IRA Singapore will send you the appropriate paper tax form, upon request, the online form will be available from 1 March each year.

It should be noted that Singaporean employees don’t need to pay tax if an employee’s annual income is less than S$22,000. However, employees still need to file returns if they have been informed by the tax authority to submit tax form.

Tax treatment of employer benefits

As stated earlier, all gains and profits derived by employers are taxable, unless they are specifically exempt from income tax or are covered by existing administrative concession. The example of taxable benefits are accommodation and housing allowance, car provided by employer, reimbursements of medical and dental treatments, overtime payments, per diem allowances, fixed monthly allowance for transport, and fixed monthly meal allowance. 

How to help employees prepare their tax legally

As tax season can be stressful for some employees, especially new hires, employers can help lighten employee’s burden by motivating and providing legal advice such as follows:

• Recognise your employees – Sending or giving a gift as well as thank you note is a good gesture to show your support to employees during such headache season. You might also want to give extra days off after tax season to make your staff feel more recognised and retain them longer in your team.
• Have a “lunch and learn” meeting – Offering onsite lunch and inviting certified tax professionals can help employees voice their frustration about tax issue and get some real answers from individuals who actually understand about taxation.
• Partner with tax firm – Paying tax can be a huge burden for employees, however, you can minimise it by partnering with a good local tax firm that can provide a discount to get employee’s taxes done professionally. If you are serious in your approach to helping your employee, doing this will require you to rely on your accounting and finance department as they know better about the tax world.

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