A tax engine is a vital piece of payroll tax software.
Payroll is one of the reasons people come to work – so your payroll should be accurate, seamless, and fast. With constantly changing tax rates, employment laws, and more, how do you ensure the above? You can build your own payroll system, improve the one you have already, or find a suitable third-party vendor. No matter what you do, you'll either come into to contact with or a need a tax engine.
A tax engine
calculates every payroll tax you'd need, starting with federal taxes all the way down to complicated locals. All 50 states and every US territory's withholding rates are programmed into a tax engine. This includes any reciprocal agreement a state may have with another. Because payroll doesn’t end with just withholding, a tax engine accounts for other payroll-related taxes like benefits.
With all this in mind, here are examples of who may need or benefit from a tax engine
In the age of technology, countless successful companies started with a software developer and an idea. One who wants to get in to the world of payroll would profit from a tax engine. He or she could provide the needed development knowledge while a tax engine would supply the correct payroll and tax information. An entire payroll system – whether it be for small or large business – can be built this way. An added bonus? A software developer can choose from C, .NET, ASP, Delphi, XML, JSON and Java wrappers to install the engine, so he or she can code in the language most comfortable to him or her.
Payroll Service Providers
Payroll providers exist in all sizes: small, medium, and large. No matter the size or the amount of employees being served, tax engines are useful to these companies because they can improve existing solutions to avoid errors and penalties. For payroll providers dealing with large businesses with states across the country, the multi-state processing capabilities of a tax engine are especially beneficial.
Professional Employer Organizations (PEOs) and Administrative Services Organizations (ASOs)
PEOs and ASOs both take on human resource and payroll tasks from client companies who outsource specified tasks. Employers typically outsource tasks such as employee benefits and payroll and workers' compensation. This makes PEOs and ASOs perfect options to take on a tax engine. If they're providing services to another company, they need to be timely, accurate, and secure. A tax engine provides all these necessities and never stores any personal data.
Some larger companies choose to do payroll in-house. However, this can cause issues in various ways, such as: the payroll department not being large enough, workers across states, obscure local taxes, and more. Tax engines provide solutions to all these worries – and then some. Location code services within a tax engine utilize the latest geo-location technology whereby precise taxes are computed based upon an employee's resident and work address. There's no room for error with a tax engine, which is appealing to any sized business.
Tax engines are consistently updated to always calculate the right taxes every time. Any personal data an employer enters is never stored, so it can't reach the wrong hands. Information goes in, and withholding knowledge comes out. But the most important reason a business, no matter the size or industry, needs a tax engine: It can calculate any tax scenario.
Read a success story on how PC Bennett Solutions utilized a tax engine.