Three Tax Principles That HR Professionals Should Know

Although it might not be obvious, tax law permeates most HR responsibilities – from paying an employee, to arranging for benefit coverages, to settling employment lawsuits, and paying pensions.  Knowing a few key tax principles may help employers understand why things are done in a certain way, what questions to ask when discussing possible solutions to a problem, and how to avoid unpleasant surprises.  Three key principles are as follows:

1. Anything (cash, property, benefits, rights, etc.) that an employer provides to an employee (including a former employee) is income to that employee and the employer has an obligation to withhold income and payroll taxes from the payment unless a specific section of the Internal Revenue Code ("Code") provides otherwise.  This principle originates from Code §61, which provides that "[E]xcept as otherwise provided in this subtitle, gross income means all income from whatever source derived. . ."  The Code requires employers to