Musings on Taxes and Employees’ Money Management

IRS: VITA

Information regarding VITA on the IRS’ website

VITA

A few years ago I served as a volunteer with VITA. VITA is the acronym for Volunteer Income Tax Assistance and is the IRS-backed program that provides free tax services to individuals with an income level of 80% of the AMI (area median income) and below. It was definitely an interesting experience. For my personal taxes, I always focused on subjects such as depreciation schedules and Schedule Ks. I never realized the determination of who is or who is not a dependent could be so involved!

That volunteer stint with VITA was a very good experience for me. I use TurboTax (or TurboTax Deluxe, Premier,…) to do my own personal taxes. I had forgotten how involved it could be to go through all the schedules and credits, etc. manually! All I can say, is Thank you Turbo Tax!! (I use an outside entity for my business taxes.)

Taxes and Employee Money Management

This brings me, in a roundabout way, to employee money management. Just as I’d never thought about the issues confronting those who use VITA, I had never realized that there is a significant group of people who have money management problems. I’ve known how to balance a checkbook since I was 13 (my grandfather owned a lounge and I helped my father do the books, so I had to learn how to balance a checkbook). However, many people apparently do not. I also know that if you spend more than you bring in, you will have financial difficulties. Finally, I know that, although the IRS can be a beast, the agency provides you with numerous notifications and opportunities to reply. You therefore ignore them at your own (significant) peril.

quote for money management

A great quote.

Unknown Issues Regarding Employee Money Management

How did I become aware of these types of money management issues among employees? Through a stint as the Interim COO of a development entity, which operated as a nonprofit. (My one and only non-profit stint. I prefer to sit on the boards of non-profits, but I enjoyed this during most of the duration.) Over 35% of the employees had some kind of garnishment or an outstanding loan from the company!! I know this because I had to initially respond to and establish the garnishment with ADP, our payroll service provider or had to review or approve employee loans. The garnishments were for back child support (I’d seen these before), garnishments for unpaid state taxes and IRS taxes, and garnishments from judgments. I could not believe it! And the vast majority of the employees constantly stated, “I am broke.” My true belief is what you consistently speak is what you consistently get.

Solutions

To counteract this, I sat down with each employee that had a garnishment request and discussed what led to the garnishment. I then discussed the options they had and how to use those options. I was able to help several work out an arrangement that nullified the garnishment. In addition, with help from a department director, I completely revamped the employee loan program, decreasing the ease of obtaining a loan including eliminating allowing a new loan when an existing one was outstanding. I also mandated that anyone making a 3rd loan request must attend a financial counseling program.

We began looking for nonprofits to supply on-site training. The problem we encountered was that we worked with those other nonprofits on behalf of the people we served so our employees considered it too embarrassing to have those same entities counsel them!

My Takeaway

In addition to the eye opening I experienced regarding taxes and financial management, my takeaway from this experience is as follows: There are many ways to help your employees, engender loyalty and increase morale. Each company has its own idiosyncrasies with employees that either have concerns or interests in unique areas. Identify and address those to help your employees and, in turn, help your company.