Tax Changes Spur Big Payroll Modifications
January 8, 2013 Alex Woodie
Congress suddenly sprang into action last week, handing down dozens of “Fiscal Cliff” tax changes that affect everything from Medicare and payroll withholding to federal tax rates and inheritance taxes. ERP vendors and third-party maintenance firms, such as HarrisData, Spinnaker Support, and Rimini Street, are taking the changes in stride, and staying on the lookout for more changes that will affect customers.
None of the changes that Congress made with last week’s vote will have an impact on 2012 taxes, although some forward-looking states, such as California, enacted new progressive tax rates that are retroactive to 2012. With that said, governments may still elect to tweak their tax forms for 2012, forcing vendors to stay on the lookout for updates that might impact their customers and their customers’ employees.
For taxpayers and accountants, the stress-inducing 3.5-month tax season is just beginning. But for ERP vendors and third-party maintenance firms, the 2012 tax season is coming to a close. Most of the work in setting the tax-calculation formulas for finalizing W2 forms was completed last year.
The tax code changes for 2013 are a separate matter, and something that vendors are working on in parallel to closing out the 2012 tax year. In particular, the 2 percent increase in federal payroll tax withholding needs to be implemented in the payroll component of thousands of ERP systems across the country. For high-income earners, there are changes to the federal income tax and Medicare. All three of these changes will have an immediate impact on the January 15 paychecks received by millions of Americans next week.
Mark Kreutz, vice president of global support services for Spinnaker, says this is traditionally a busy time of year for his team. However, while the changes required for 2013 may be of a higher volume than past years, overall there’s not much difference this year, he tells IT Jungle.
“We’ve been doing this for a long time,” Kreutz says. “Even though we’re anticipating a lot of changes coming our way, and there are some that we don’t know [about yet], it’s really no different from what we’ve seen in the past. It might have a different scale to it. There might be a little bit more changes coming our way. But it terms of our process, it’s very much the same as last year.”
Keeping current on taxes is part of the job for Spinnaker, which provides technical support and maintenance for 180 customers running JD Edwards World and Enterprise and SAP ERP systems. Kreutz leads a team that meets throughout the year to go over any tax or regulatory changes that may impact Spinnaker’s customers.
“Our cycle starts in October when we start reaching out to customers. At that time, we know preliminary information from various websites and government agencies. We know what to expect and what’s coming our way, and then we set expectations with our customers. Of course things can change along the way. So we always have that caveat–here’s what we know today … and we’ll keep you posted on anything new that will come in.”
2013 may bring a pretty big caveat. While Kreutz credits Congress with being pretty good about minimizing tax changes into the year, he expects more changes to be handed down throughout the year. “We think there’s probably a lot more coming our way. We think there’s going to be more change. So we are looking ahead at ramping up on certain areas on the payroll side of things,” he says.
Things have also been busy over at Rimini Street, Spinnaker’s primary competitor in the third-party maintenance biz. According to Rimini spokesperson Dave Rowe, it took one day to implement 2013 tax year changes for its Oracle and SAP customers after Congress passed its “Fiscal Cliff” bill.
“We are committed to providing our clients the fastest ‘legislature-to-live’ tax, legal, and regulatory updates in the industry. In fact, on Friday, January 4, we delivered our latest update to more than 400 clients based on withholding and related changes issued by the IRS the day before, Thursday January 3,” Rowe writes via email.
Rowe says Rimini, which is likely to go public this year, has invested more than $20 million building a tax, legal, and regulatory update service. The company either hires or has contracts with a variety of tax specialists, attorneys, and international tax, legal and regulatory professionals who monitor dozens of government and private-sector sources to help clients react and comply with changes in more than 200 countries around the world, Rowe says.
IBM i ERP developer HarrisData is also dealing with the onslaught of changes for 2013, and looking forward to additional changes down the road. “Like everyone else, we monitor the regulatory changes (both real and anticipated) as closely as possible,” HarrisData executive vice president Michael Mallen says.
“Most HarrisData customers run their HarrisData Payroll software on-premise, on servers controlled and operated by their IT departments,” he continues. “Consequently, our challenge is to get updates available to our customers as quickly as possible, and to make those updates as easy to install as possible. We offer customers both a real-time download area on our website (for urgent updates) and a monthly update option that enables them to access updates in a timely fashion and install them easily.”