Each year, employers have an impactful yet underutilized window to steward employees toward improved financial security: Tax time.
This tax season, every employee—from the most junior member to your executives—will spend time reviewing their financial situation. Employees who pay taxes are considering their tax strategies, and those receiving tax refunds are looking forward to this windfall moment. Both scenarios present a significant opportunity for employers to support employee financial health, as in 2024, the IRS issued over $334B in tax refunds to 105M filers, which represents approximately two-thirds of US adults.
You can help maximize this moment by implementing strategies that identify and communicate tax credit eligibility, educate your employees on unclaimed tax credits, and reduce tax preparation fees. This is also a time to encourage employees to direct some of their refunds toward savings and to enroll in existing workplace benefits that align with their financial goals.
Federal and state tax credits, like the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the upcoming Savers Match are often the catalyst for receiving tax refunds and represent a significant source of income outside their paychecks for eligible individuals. Yet many workers leave money on the table due to a lack of awareness or the quality of their tax preparation support.
According to the Tax Policy Center, about 5 million eligible taxpayers do not claim the EITC credit annually, resulting in approximately $7B unclaimed benefits each year. Some employees even incur costs for tax prep and to receive their refunds, when they actually qualify for free tax preparation and can receive their refund in less than three weeks without additional fees.
Here are four innovative approaches you can take this tax season to increase the size of your employees’ refunds, enable informed decision-making, and foster greater financial confidence among your workforce:
Offer Tax Preparation Resources, Discounts, and Benefits
Employees tend to trust information from their employers. Consider partnering with a reputable digital tax preparation platform to ensure your workforce is maximizing their refund opportunity. Organizations like AAA and other platforms may provide member or employee discounts or guide employees toward eligible federal and state credits based on their unique financial situations. Many employees are also not aware of “Direct File,” a new IRS service—available in English and Spanish free of cost—that enables online federal tax filing.
Increase Awareness of Free Tax Preparation
Many individuals qualify for free tax preparation assistance. Programs like the IRS’s Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), the Department of Defense’s MilTax program, and AARP Foundation’s Tax-Aide, offer online tax preparation, electronic filing, and direct deposit of refunds at no cost.
For those who have a preference for in-person tax preparation, you can offer free financial coaching that includes tax preparation via an in-house certified finance professional or through your existing coaching resources. Offering access to experts during tax season is a powerful way to support your employees’ financial health. If you already offer financial coaching resources, framing engagement around tax time may increase their use.
Take Advantage of Life Events and Key Messaging Moments
There are numerous federal and state tax credits related to life events, including those tied to having children, saving for retirement, childcare, post-secondary education, and health insurance. Employers are often made aware of these life events that can change or increase an employee’s eligibility for certain credits—such as marriage or the birth or adoption of a child—or during key moments like filling out or updating a W-4 form or open enrollment. These are prime opportunities to communicate about tax credit eligibility and available tools and resources that may help.
Include Tax Information in Inclusive Financial Wellness Campaigns
Combine the strategies above into a comprehensive and inclusive financial wellness campaign and you’ll amplify their impact. By using existing employee data, for example, you can target outreach and intentionally bundle coaching that includes tax preparation, credit eligibility, and available workplace benefits education.
By considering tax time through the lens of inclusive workplace financial benefits, employers help put their employees—who have many competing priorities—in a position to save, notes retirement expert and author Anne Lester, a member of the Advisory Council for “Benefits For the Future,” Commonwealth’s initiative supported by JPMorganChase to advance access to inclusive workplace benefits.
“Saving for the future—whether it’s building up a ‘rainy-day’ fund or saving for retirement—can feel daunting when the expenses of daily living keep piling up. One of the best ways to jump start savings is by taking advantage of windfalls like tax refunds,” says Lester. “Helping your employees save half—or more—of their refund can help them create an emergency cushion that will keep them out of debt. And that, in turn, will help them save for longer-term goals like retirement. And if you can help them maximize that return by ensuring that they get everything they are entitled to? It could be transformational.”
When employees—especially those earning a low to moderate income—are financially stable, productivity increases, attrition decreases, and companies attract better talent. You can unlock these outcomes through enhanced benefits and you’ll drive usage, engagement, and positive outcomes for your employees, and create a more financially sound and productive workplace culture where everyone can thrive.
Backed by a $7M philanthropic commitment from JPMorganChase, Benefits for the Future is a workplace benefits program engaging with employers nationally and across targeted local markets over the next three years to pilot and scale innovative employer benefits to improve the financial health of 2.5 million workers. If you are interested in exploring how to incorporate a more holistic, equitable benefits package for your employees, please contact us at info@buildcommonwealth.org.